Tuesday, October 17, 2017



The Haier Road to Growth
Customers always come first for this Chinese appliance maker — even as it continually reinvents itself and expands around the world

 https://www.strategy-business.com/article/00323


This is a great example of how customer insights lead to incredible growth.


Start with 30 million responses on your QZone, Tencent, and other social media platforms — all to a simple question: “What do you want in air conditioning?” Then pay attention to the more than 670,000 people who take part in the online conversation that follows. You’re bound to come up with something cool — or, more precisely, “cool, not cold.” This concept, drawn from online responses, became the tagline for the Tianzun (“Heaven”), Haier’s advanced household heater/air conditioner/air purifier, released in 2014. Many Asian consumers don’t like the chilling effect of conventional temperature control. They’d much prefer to be “cool, not cold.” But there’s more to the concept than temperature. Air from most such devices in China is dry and dusty. The machines themselves are too noisy, or too likely to spread disease (bacteria live in air conditioning systems). Moreover, the machines look — well, like air conditioners.
The Tianzun doesn’t have any of those drawbacks. It is an obelisk-like device with a small wind tunnel that draws air through it from the room where it is positioned. It has an Internet connection, so consumers can use their smartphones to warm or cool the room while on their way home. Some consumers probably knew they wanted that feature, but they didn’t know that they wanted to see the circle’s light shift from red to blue as their air quality improved. Once they saw that happening, they were hooked. The product is targeted directly at a consumer segment that no other company, in the West or the East, has recognized, and that could end up being much bigger than a niche.
By building cooling machines based on this in-depth and multilayered approach to consumer insight, Haier is following its own core principle: “customer service leadership,” or the necessity to shape the future by giving customers what they want most (but may not have yet realized they can ask for). Even the decision to use the phrase “cool, not cold” in its Chinese advertising campaign reflects this principle. These are the words that customers use themselves, as opposed to a slogan dreamed up by a marketing professional….
While the marketing staff digested the insights gained from Haier’s online customer interactions, manufacturing was already considering what they would mean for production, procurement was speaking directly to suppliers about sourcing feasibilities, and after-sales service was developing plans for follow-through. Because they worked closely together from the start, managers from all these functions were moving forward in concert, addressing possible disconnects as they arose. This allowed products to go to market as soon as they were designed and developed, instead of waiting for each department to throw its work “over the wall” to the next one. Meanwhile, representatives of each company function conducted conversations directly with customers, thereby adding a responsive new dimension to the company’s consumer insight capabilities
… The company is known for several distinctive capabilities: a precise understanding of consumer needs, especially in China and other emerging markets; the ability to rapidly innovate new types of appliances that meet those consumer needs; the management of complicated distribution networks, a skill honed in the complex Chinese market; and a high level of execution ability, including the automation of factories to deliver products to consumer specification. 



Friday, October 06, 2017



Four Business Models for the Digital Age

John Sviokla
Very powerful material that will only gain in importance


Digitization, which is of course happening all around us, is opening up a whole new spectrum of opportunities to create value. But how do you navigate this new horizontal world?
Opportunities for companies in every industry are occurring on two critical dimensions: knowledge of the end customer and business design, i.e., breadth of product and service offerings. These dimensions combine to form four business models for creating value (see exhibit): Suppliers, Multichannel Businesses, Modular Producers, and Ecosystem Drivers.

Suppliers, in the lower left quadrant, have little direct knowledge of the preferences of their end customers, and may or may not have a direct relationship with them. These companies sell their products and services to distributors in the value chain. Due to the ease of digital search, they are vulnerable to pricing pressures and commoditization as customers look for less expensive alternatives. Washing-machine manufacturers are a good example of Suppliers, as are companies that create mutual funds sold by someone else.
If you are a Supplier, you need to make sure your operations are as efficient as possible, but that’s only the first step. As digitization continues, end customers will increasingly expect you to cater to their likes and needs. So if you don’t know much about your end customers and aren’t intent on solving their problems, you’ll need to find other ways to ward off commoditization. That means making sure that your product is highly differentiated or that it goes through a distribution channel other than one controlled by an Ecosystem Driver, another of the business models, which has a broad supply base. Otherwise, you risk losing all the value your enterprise has created.
Haier, the world’s largest manufacturer of white goods, has deployed various strategies to differentiate itself from competitors. It has developed a variety of niche products, including washing machines that accommodate the long gowns worn by women in Pakistan, and freezers that can keep food frozen for 30 hours in the event of a power outage in Nigeria. More recently, Haier used the Internet to open up its innovation process to people outside the company, enabling an unprecedented level of customization.
Multichannel Businesses, in the upper left quadrant, have deep knowledge of their consumers because they enjoy a direct relationship with them. Companies in this category provide access to their products in various digital and physical channels to ensure the seamless experience their end customers have come to expect. Many banks and brokerage houses are Multichannel Businesses, as are some retailers and insurance companies.
If you are an Multichannel Business, there’s no such thing as too much customer knowledge. Broadening your understanding your customers’ life-event needs is essential for building out the integrated experience that will retain existing consumers and attract new ones.
IKEA, the world’s largest furniture company, is an example of an Multichannel Business that continues to find ways to enhance the range of offerings within its value chain. Building upon its global presence — currently more than 300 stores in 41 countries — IKEA used its extensive knowledge of its customers (gleaned through visits to homes, for example) to develop “products for an everyday life” — from bedroom furniture to prepared food, all under IKEA’s iconic brand. After decades of focus on the customer experience in its stores, IKEA recently launched online shopping, making the purchasing experience truly seamless and gaining a way to learn even more about its customers.
Modular Producers, in the lower right quadrant, offer a distinct capability that spans the ecosystem, but they have little direct knowledge of the end customer. Their plug-and-play offerings can work with any number of channels or partners, but they rely on others for distribution as well as for guidance on what the customer needs. A good example is payment companies that enable the consumer to pay for a wide range of goods and services, such as groceries and college tuition.
If you are a Modular Producer, you need to be the best at everything. As is the case with Suppliers, competition is fierce, so your offerings need to be innovative and well priced.
Square Inc. fits the profile of a Modular Producer. Founded in 2009, the B2B payments company has continuously launched innovative software and hardware products that are ecosystem-agnostic. Square’s point-of-sale, payroll, employee management, and appointment apps can be used on Apple and Android devices alike, as can its chip and magstrip readers.
Ecosystem Drivers, in the upper right quadrant, have the best of both worlds: deep end-customer knowledge and a broad supply base. They leverage these dimensions to provide consumers with a seamless experience, selling not only their own proprietary products and services but also those from providers across the entire ecosystem. Thus, they create value for themselves while extracting rent from others. Large internet retailers in the U.S. and China are good examples of Ecosystem Drivers, as are some healthcare providers.
If you are an Ecosystem Driver, you’ll want to keep pushing the boundaries in both dimensions, increasing your knowledge of end customers and the breadth of offerings available to them.
As Weill and Woerner’s research demonstrates, the prospects for creating value are greatest for companies that participate in ecosystems rather than in value chains, so Ecosystem Drivers have the greatest potential for value creation and Suppliers the smallest. All four paths are viable routes to enduring success, provided you are clear on what your generic strategy is and what that strategy requires. If, however, you are losing customers or growing more slowly than your market, you should consider moving to a different quadrant, either by expanding your knowledge of your end customers or by becoming more of an ecosystem.
Or even by doing both: GE is moving from being a Supplier of industrial products to an Ecosystem Driver in the Industrial Internet of Things, with the help of Predix, the cloud-based operating system it launched last year. Serving as a platform for services provided by third-party vendors as well as GE business units, Predix helps companies collect, analyze, and leverage operational data so they can optimize the performance of their entire system. As Predix’s customer base grows, so will GE’s status as an Ecosystem Driver.

As digital becomes the new normal, the paths to success are there for the taking. But be sure you know your destination before setting out.



Monday, September 25, 2017



A Survey of 3,000 Executives Reveals How Businesses Succeed with AI


Highly important issue that will change our world

The buzz over artificial intelligence (AI) has grown loud enough to penetrate the C-suites of organizations around the world, and for good reason. Investment in AI is growing and is increasingly coming from organizations outside the tech space. And AI success stories are becoming more numerous and diverse, from Amazon reaping operational efficiencies using its AI-powered Kiva warehouse robots, to GE keeping its industrial equipment running by leveraging AI for predictive maintenance.

Key learning's are:

Don’t believe the hype: Not every business is using AI… yet. While investment in AI is heating up, corporate adoption of AI technologies is still lagging
Believe the hype that AI can potentially boost your top and bottom line. Thirty percent of early AI adopters in our survey — those using AI at scale or in core processes — say they’ve achieved revenue increases, leveraging AI in efforts to gain market share or expand their products and services. Furthermore, early AI adopters are 3.5 times more likely than others to say they expect to grow their profit margin by up to five points more than industry peers
Without support from leadership, your AI transformation might not succeed. Successful AI adopters have strong executive leadership support for the new technology.
You don’t have to go it alone on AI — partner for capability and capacity. With the AI field recently picking up its pace of innovation after the decades-long “AI winter,” technical expertise and capabilities are in short supply. Even large digital natives such as Amazon and Google have turned to companies and talent outside their confines to beef up their AI skills
Resist the temptation to put technology teams solely in charge of AI initiatives. Compartmentalizing accountability for AI with functional leaders in IT, digital, or innovation can result in a hammer-in-search-of-a-nail outcome: technologies being launched without compelling use cases.
Take a portfolio approach to accelerate your AI journey. AI tools today vary along a spectrum ranging from tools that have been proven to solve business problems (for example, pattern detection for predictive maintenance) to those with low awareness and currently-limited-but-high-potential utility (for example, application of AI to developing competitive strategy)
Digital capabilities come before AI. We found that industries leading in AI adoption — such as high-tech, telecom, and automotive — are also the ones that are the most digitized. Likewise, within any industry the companies that are early adopters of AI have already invested in digital capabilities, including cloud infrastructure and big data.

The biggest challenges are people and processes. In many cases, the change-management challenges of incorporating AI into employee processes and decision making far outweigh technical AI implementation challenges. As leaders determine the tasks machines should handle, versus those that humans perform, both new and traditional, it will be critical to implement programs that allow for constant reskilling of the workforce.