Tuesday, June 26, 2012

Three Myths about What Customers Want
9:10 AM Wednesday May 23, 2012
by Karen Freeman, Patrick Spenner and Anna Bird

Very interesting! Although this article focuses on business to consumer dynamics, I think it can be a critical learning for business-to-business interactions.

Most marketers think that the best way to hold onto customers is through "engagement" — interacting as much as possible with them and building relationships. It turns out that that's rarely true. In a study involving more than 7000 consumers, we found that companies often have dangerously wrong ideas about how best to engage with customers. 
Myth #1: Most consumers want to have relationships with your brand.
Actually, they don't. Only 23% of the consumers in our study said they have a relationship with a brand. In the typical consumer's view of the world, relationships are reserved for friends, family and colleagues.
Myth #2: Interactions build relationships.
No, they don't. Shared values build relationships. A shared value is a belief that both the brand and consumer have about a brand's higher purpose or broad philosophy
Myth #3: The more interaction the better.
Wrong. There's no correlation between interactions with a customer and the likelihood that he or she will be "sticky" (go through with an intended purchase, purchase again, and recommend)
How should you market differently? 
Instead of relentlessly demanding more consumer attention, treat the attention you do win as precious. Then ask yourself a simple question of any new marketing efforts: is this campaign/email/microsite/print ad/etc. going to reduce the cognitive overload consumers feel as they shop my category? If the answer is "no" or "not sure," go back to the drawing board. When it comes to interacting with your customers, more isn't better.

Tuesday, June 19, 2012

It's Time to Rethink Continuous Improvement
1:25 PM Tuesday May 8, 2012

This has been an issue with me for years and is critical to having a successful growth company…companies must be ambidextrous and chose the right process for a given task. Go to our blog site (http://marketdrivengrowth.blogspot.com/)and look under the articles titled Process: Being Ambidextrous on the left hand column. This IS CRITICAL!!!!!!!!!!!!

Six Sigma, Kaizen, Lean, and other variations on continuous improvement can be hazardous to your organization's health. While it may be heresy to say this, recent evidence from Japan and elsewhere suggests that it's time to question these methods…..
Admittedly, continuous improvement once powered Japan's economy….…But what's happened in Japan? In the past year Japan's major electronics firms have lost an aggregated $21 billion and have been routinely displaced by competitors from China, South Korea, and elsewhere. As Fujio Ando, senior managing director at Chibagin Asset Management suggests, "Japan's consumer electronics industry is facing defeat. "Similarly, Japan's automobile industry has been plagued by a series of embarrassing quality problems and recalls, and has lost market share to companies from South Korea and even (gasp!) the United States.Looking beyond Japan, iconic six sigma companies in the United States, such as Motorola and GE, have struggled in recent years to be innovation leaders. 3M, which invested heavily in continuous improvement, had to loosen its sigma methodology in order to increase the flow of innovation. As innovation thinker Vijay Govindarajan says, "The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation. The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different….."Customize how and where continuous improvement is applied. One size of continuous improvement doesn't fit all parts of the organization. The kind of rigor required in a manufacturing environment may be unnecessary, or even destructive, in a research or design shop…Question whether processes should be improved, eliminated, or disrupted. Too many continuous improvement projects focus so much on gaining efficiencies that they don't challenge the basic assumptions of what's being done….Assess the impact on company culture. Take a hard look at the cultural implications of continuous improvement. How do they affect day-to-day behaviors? A data-driven mindset may encourage managers to ignore intuition or anomalous data that doesn't fit preconceived notions

Tuesday, June 12, 2012

In a Downturn, Provoke Your Customers
HBR, March 2009
by Philip Lay, Todd Hewlin, and Geoffrey Moore
The companies you serve are slashing their budgets—but you can still make the sale.

This is a fascinating article on doing business in hard times. How many of you run into problems at your customers because their discretionary budgets are gone? The underpinning of this approach – going to your customers with a provocation to help stimulate their interest and therefore “find” the budget – requires you to REALLY know your customer and the context/system/environment in which they do business. A very important factor is that you must try to reach the most senior people because it requires finding the dollars.

I did this in 1982 recession without having the benefit of having a name for it. I was selling an undifferentiated product into a market that was declining but had substantial cash flow for DuPont. The industry sales-to-capacity was low as you would expect in a severe recession. One of our largest customers had their own capacity that satisfied about half their needs. I approached the most senior purchasing person with a provocative idea – if you shut down your capacity, we will offer a supply package that you will not be able to say no to. The capacity went down within six months with a substantial cost (they found the budget) and when the market came back, our sales-to-capacity was better than our competition and we benefited for years.

I recommend reading the article.

No question about it: This is a tough time to be selling to business customers. The budget allowances simply aren’t there. If you thought it was hard to make a sale before—when typically 85% of a customer’s budget was allocated to existing commitments and only 15% remained for discretionary spending—you’re finding out how much harder it can be, as even that fraction disappears in across-the-board cuts. Making matters worse, your customer relationships have lost much of their power. With less money to go around, proposals are subjected to higher levels of review in buying organizations, and the managers you’ve traditionally dealt with are no longer the decision makers.
All this would be thoroughly discouraging if not for one fact: Companies have survived downturns before, and some have even profited from them. In the research and consulting we’ve done since the 2001 dot-com bust, we’ve seen how. Rather than resign themselves to hearing the standard “Sorry, we have no budget for that,” some vendors—even some very young start-ups—have found a way to reach their customers’ resource owners and motivate them to allocate the necessary funds. Using what we call provocation-based selling, they persuade customers that the solutions they bring to the table are not just nice but essential…………

Learning to Be Provocative

Underlying provocation-based selling is the idea that the vendor should help the customer find investment funds even when discretionary spending appears to have (at least temporarily) dried up.

Sybase, a data management and mobility company, did just that in the spring of 2008, as it tried to pry business out of financial services clients. Companies it had served for years were cutting overall operating costs severely. Instead of using precious meeting time to discover what customers were fretting over, Sybase salespeople told them what should be keeping them up at night: the fact that managers across the industry were failing to look at risk in a comprehensive and integrated way. Financial institutions tended to have separate risk-management systems for credit cards, mortgages, commercial lending, equity investment products, fixed income, commodities, and derivatives. Sybase’s message was that a risk-management failure in one area (say, home mortgages) would have direct consequences for the risk exposures in other areas (for example, collateralized debt obligations and other derivatives), so companies had to find a way to bring their risk positions together in a single view. By revealing the scale of the threat and the opportunity, Sybase could sell its Risk Analytics Platform (RAP), a new tool for integrating risk management, to clients who had not previously been troubled by the lack of one.

This was provocation-based selling at its finest: The vendor identified a process that was critical for customers in the current business environment, developed a compelling point of view on how it was broken and what that meant in terms of cost, and then connected the problem to a solution that the vendor was offering.

Friday, June 08, 2012

Is Your Company Fit for Growth?
A more strategic approach to costs can help you prepare for the next round of expansion.
by Deniz Caglar, Jaya Pandrangi, and John Plansky

Three very simple but powerful questions. Those who have taken our Driving Organic Growth class know we spend considerable time addressing these issues  (http://www.kellogg.northwestern.edu/execed/Programs/ORGGROW.aspx). These three questions should dominate leadership's time in the context of driving growth

Is your company fit for growth? Many companies today are not. The way they manage costs and deploy their most strategic resources is preventing the expansion they need. But they don’t realize it — at least not yet. 
How can you tell if your company is fit for growth? Here is a simple, three-question diagnostic: 
Do you have clear priorities, focused on strategic growth, that drive your investments?
Do your costs line up with those priorities? In other words, do you deploy your resources toward them efficiently and effectively?
Is your organization set up to enable you to achieve those priorities?
….The easiest way to answer these questions is to imagine the opposite. 
.....If you do not have clear growth priorities, there are several warning signs. You have so many initiatives that you can’t remember them all…
…If your costs are not deployed appropriately, that’s also painfully apparent — especially in the amount you spend on nonessentials….
….If you don’t have a well-designed organization that is evident as well. You are not nimble enough to move quickly, or aligned enough to work in harmony. It takes a week to get a sales quote approved, while your competition wins the business. Information is not readily available to the people who need it. 

Tuesday, June 05, 2012

Netflix Wasn’t All Wrong
Published: April 2, 2012
by Ken Favaro with Kasturi Rangan


The following highlight very important lessons learned from a very public failure. In less than one month. Netflix’s market cap dropped by 70% and lost over 800,000 subscribers!

"In October 2011, one of the great backflips in the annals of business strategy took place. Netflix Inc., the most prominent video rental service company in the world, had begun to charge separately for its DVD-by-mail service and its streaming service in July, which in effect had increased prices by 60 percent for customers who used both services. Then, in September, Netflix had gone further, announcing it would split those services into two separate businesses, renaming the DVD-by-mail operation Qwikster. Consumer protests, conducted largely over the Internet, forced the retraction in October; Netflix announced it would revert to providing a combined service under one brand.
They DID get some of it right:
The business split. They got this right. The natural boundaries between the physical (mail) and virtual (streaming) markets for pre-recorded movies are increasingly sharp, especially as the streaming market takes off. These two delivery models require distinct assets and capabilities to be successful, and each faces a very different group of competitors.
Pricing. They got this right, too. Services that deliver discs by mail have different demand curves from those that stream video content, and they also have very different costs to serve their customers. That’s why different pricing schemes make sense. ….Before July 2011, Netflix had bundled streaming with its core delivery-by-mail service because it was a nascent market and the selection of available videos was limited. The market had not been ready for a stand-alone streaming-only business. During that period, Netflix subsidized the development of its streaming business by essentially giving it away to its DVD-by-mail subscribers. Later, though, with competition from the likes of Apple and Amazon, that would have to change
Brand management. The company really didn’t think this through. Netflix chose to make explicit the distinction between its two business models by giving them separate brands — Qwikster for the original by-mail business and Netflix for the new streaming business — and requiring separate unlinked accounts. This was a tricky and unfortunate decision.
Communications: timing is sometimes the hardest part of strategy to get right. Netflix likely judged correctly that its mail business was going to be cannibalized and ultimately replaced by streaming. But no one can really know for sure how fast that might happen. Moving too early can be disastrous, as Netflix learned, but moving too late can be even worse — as companies such as Kodak, Research in Motion, and Nokia have discovered. Second, strategy should be based on how customers behave, not on what they say. Before Netflix announced its change, customers had posted many online messages about the value of switching to streaming. But talk is cheap. Third, when customers have an intense loyalty to a particular product (or service or brand), they become nearly as vested in the product as the company is. Finally, strategy has to be dynamic and iterative. Customer reaction to any change in a company’s value proposition is difficult to know a priori, even with the best market research. Having the agility to change your choices when new information comes to light is essential to strategy success. This type of agility, no matter what mistakes Netflix made, may save the company in the end"