Customer Crossroads

A modest proposal about procurement: let's turn the RFP process on it's head

The procurement process, and it's main product, the Request for Proposal or RFP, was once useful, but has become a barrier to innovaton and productivity.

Let's look first at the reasons why:

There is a desire for fairness and consistency.

While fairness is admirable when it is reducing corruption and patronage, it also suppresses merit. It favors the familiar. It favors the formulaic.

The investment of time is all on the side of the supplier.

The decision-makers sometimes decline to meet or talk to the suppliers being asked to bid. Usually. The rationale - hey, they're busy people, they don't have time for a bunch of conversations. This is a major suppression of collaboration and idea exchange, which again results in a suppression of innovation. Buyers who had to invest the time to actually talk to all suppliers would reduce their short list. They might stop focusing on price, and instead focus on judgement. Like who they are motivated to work with. Who they think is triggering useful thinking. Who has better ideas.

There is frequently no clear definition of the challenge, but there is sometimes a specification of solutions.

This is so upside down it would be laughable if it weren't so common. The best consultants are those that help redefine the essence of the problem, then engineer elegant ways to address it. Sometimes much less expensive ways.

Systematic extraction of collaborative effort. Lack of trust

It is through collaboration, especially in the discovery phase, that considerable value is added. If there is any hope of collaboration throughout the project, it should start at the beginning, when the work is being designed.

One of the worst parts of the whole procurement process as it exists today is that new relationships begin with a lack of trust and a lack of disclosure. Not a great way to start a working relationship where trust and disclosure are going to be absolutely essential for success.

When you are awarded a project under these conditions, you are often starting over when you actually sit down with the client.

The traditional RFP starts with the notion of specifying the process or "work product", and asking for pricing.

While this may make sense for road-building (road builders may disagree!), it rarely makes sense for the kind of squishy and amorphous situation that most business executives are facing today.

No budget disclosure

The underlying belief here seems to be that if you tell the supplier your budget, they will spend all of it. Or perhaps they will not fine tune their proposal enough, not be as aggressive as they could have been on pricing.

This lack of budget disclosure also leads to a frequently encountered situation. The client suggests they are prepared to invest in a BMW. So you propose a few options. BMW, high-end BMW, and perhaps a very nice Toyota, in case they didnt know what BMWs actually cost.

Client then discloses that in fact they were thinking in terms of a BMW motorcycle. Yikes. I just spent three days wasting my time and a bunch of other people's time designing the wrong thing.

Plus, there almost always is a budget. On a recent situation, a team I was on was asked to trim a very specific amount of money from a large quote, in order to fit a budget window that we had not been given. Where is the logic in this?

Let's turn this upside-down

Start with the investment

An improved RFP process would start with the investment -- what the client is prepared to pay for a solution -- and invite proposers to say how much they can offer within this budget (or perhaps less).

This approach would solve a problem that we often face as suppliers -- an unwillingness to state even a range of value. It means that the suppliers, without the benefit of looking at your financial information, have to determine what the value of a good solution is to this specific challenge.

But inside the firm, you do understand if it's worth $10,000 or $100,000 to get a grip on this issue.

This virtually guarantees you will receive a template solution. Or your bidders have to take some wild guesses about what might be going on and design to that.

Disclosure

Make me sign the non-disclosure, then give me some real disclosure to work with.

Focus on capabilities and fit, not pricing

You don't want to wear the cheapest shoes, do you? Did you choose your employees based on getting the cheapest people you could get?  Or were you looking for a combination of skills and fit? When you go for a haircut, are you going for the $10 standard bowl, or are you paying a fat premium for skill with scissors?

A focus on price can only be based on an underlying assumption that every haircut is the same. Of course they are not the same.

Knowledge-based services are not as fungible as they might appear on the outside.There are tiers of value. If you want the top tier, you have to pay for that.

It's time for a change

Managers regularly try to circumvent the purchasing process. I do not think they do this because they are lazy, corrupt or incompetent. I think this is solid evidence that the process is not serving them well.

All processes must evolve. It's time for purchasing to evolve to fit the needs of a knowledge-based economy and the need for innovation to drive competitive success.

Today's article was triggered by seeing a post on LinkedIn from Solution Focused Alan Kay, which instantly combusted with a pile of simmering frustration to produce this article. And therein is the virtue of collaboration -- the best stuff comes from human interaction, not isolation. Something to consider the next time you want to issue and RFP.

Related articles

Death by RFP: 7 Reasons Not To Respond

We have questions about your website RFP

The post-consumption era: this is the real end of the world you need to prepare for

There was lots of collective fun-making when the recently predicted end of days did not come to pass. "Rapture photos" were posted (empty clothes in amusing places), and there was a frenzy of Facebook status updates monitoring the fun.

The real Armageddon for most of us will creep up more slowly -- it's the shift many are predicting to a post-consumer culture.

Consumer Culture is the water we swim in daily

If you live in the affluent societies of the first world, the dominant culture is a consumer culture. A nice definition is available on the AQR website:

A culture may be understood as a pattern of beliefs, values, meanings and customs shared by a group of people, often existing at an implicit or taken-for-granted level. Consumer culture suggests that consumption - the act of buying goods or services - is a cultural activity, one imbued with meaning and driven not just by practical or economic factors. Mapping and exploring the business implications of these cultural meanings is one of the principal functions of qualitative market research.

Consumer culture is not the only thing going on, but it's a big part of our individual and collective mission to make meaning.

If you doubt this, here's a simple self-test for you -- name the first 10 brands that come to mind.

For most people, this exercise quickly becomes complex, especially if done in a group. Are you a Tide person? Are you defined by Crest? By Apple? By Mercedes? By Prada? By Black + Decker?

Global Alarming -- the forces driving change

There are signs that things are changing. Terrorism and the uncertainties it has brought to all of the first world (we now get to share the terror with the rest of the world, who never stopped experiencing it), is thought by many to be an important driver of cultural change.

Our increasing awareness that the planet cannot indefinitely support this level of abuse is another important driver.  It's not just air pollution now, or the holes in the ozone layer -- we have an abundance of environmental issues that are concerning: overfishing, extinctions, climate change, water shortages, melting glaciers, and peak oil, to name a few.

The global recession is another key driver here, adding an immediate need for many to look at their individual lifestyle and decide what is important.

What it all means for business and marketing

A nice piece of work from David Carlson called "Closed Wallets, Closed Minds" looks at this phenomenon from the designer's perspective. "We are increasingly suffering from consumption fatigue", says Mr. Carlson. Companies that want to be part of this change, rather than a victim of it, will need to "listen to what the consumer wants, rather than tell them".

Mr. Carlson posits that a relationship economy is forming, but admits none of us can really see the future.

Only the future will tell if the climate of anti-consumerism is genuine, or if we are only on a pause between mad bouts of bag filling.

It's a beautifully constructed report, as always, and will get you thinking -- as it did me.

What's your take?

What signs of change are you seeing? I love to hear your comments, thoughts and observations.

The wisdom of CK Prahalad

Strategy + Business recently published an interview with CK Prahalad conducted prior to his sudden death in April 2010: “The Life’s Work of a Thought Leader,” by Art Kleiner.

It's a delightful read, and a reminder that interviews with really fascinating people, conducted by skilled interviewers such as Art Kleiner, can provide a real window into someone's thinking.

CK Prahalad is best known for his books, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits and The New Age of Innovation: Driving Cocreated Value Through Global Networks.

Here are a few of the quotes from the article that I particularly liked:

“A lot of times, research tends to start with the methodology. I prefer to start with a problem that’s of interest and apply whatever methodology is appropriate.”

“Every one of my research projects started the same way: recognizing that the established theory did not explain a certain phenomenon. We had to stay constantly focused on weak signals. Each weak signal was a contradictory phenomenon that was not happening across the board. You could very easily say, 'Dismiss it, this is an outlier, so we don’t have to worry about it.' But the outliers and weak signals were the places to find a different way to think about the problem.”

"Big impactful ideas are conceptual breakthroughs, not descriptions of common patterns. You can’t define the 'next practice' with lots of examples. Because, by definition, it is not yet happening.”

“If your aspirations are not greater than your resources, you’re not an entrepreneur. For large companies to be entrepreneurial, they have to create aspirations greater than their resources. You can call it 'strategy as stretch' or 'strategic intent.'"

“No entrepreneur starts with adequate resources for his or her aspirations. If you want to create entrepreneurial drive in a large company, you have to create aspirations that lie outside your resource base.”

“Strategy is about creating new competitive space.”

“If I had to characterize my deepest belief, I would say it’s the centrality of the individual.Institutions are not central. Institutions are different ways of combining skills and capabilities of the moment.”

“When you look at an organization’s core competencies as its most valuable resources, you can begin to think of learning, creating strategy, and innovation as parts of a single long journey. The journey is iterative, interactive, and full of small steps. Nobody gets a big aha one day. Instead, there is searching; there are missteps, experiments, and doubt. … There are breakthroughs, but they happen over a long period of time.”

New Pew study blasts stereotype of online demographics

There's a lot of stereotyping of people over 65 going on in marketing circles. The assumption is often that those born pre-war are technophobes, don't get it, and aren't online.

This is wrong, and new stats from Pew Internet prove it. Read a nice summary here, from MediaPost.

Remember all that blather about the big intergenerational wealth transfer? How all the boomers parents were going to leave all their money behind? Well they are actually much more engaged with living and with living well than those forecasters predicted. They're still around and many have disposable income. And they are online. Okay, most of it is e-mail. But it is still growing, the change hasn't stopped.

Another stereotype I hear a lot is that GenY (Millenials) are dominating the online world. In fact, it turns out that GenX is much more likely to transact online. Perhaps because they have a lot more transacting to do at their stage of life, and no time to go shopping.

Resources:

Generations online in 2009, study conducted by Pew Internet and American Life Project.

Altered planning and goal setting for an energized start to the new year

I love the energy that accompanies the changes of seasons and rituals like New Year, or back-to-school, or first day of spring. It feels like a great time to plan, and I've been working away on goals and plans for the year ahead.

The trouble is, most of what we produce as goals fails to energize, or only scares us when we see the number of projects needed to produce the desired revenue.

Here's an alternative that might help you and your team get charged up and dream a little, instead of just feeling overwhelmed by the official plan. It's called Picture It, and you can do it on your own or as a group.

                      Picture It

What you need:
[1] Some bigg-ish pieces of paper or posterboard. The low-budget approach is to take some file folders and open them up. Everyone needs one. Colored is always better, it helps us be more playful, always a good thing when we want to get some positive energy moving

[2] A bunch of magazines. Go for stuff like business and news magazines, because they have more evocative images than fashion magazines. e.g. Fast Company, Wired, Time

[3] Scissors

[4] Glue stick or tape. Could use a stapler in a pinch

[5]  Garbage bag

[6] Optional: colored markers. I like the ones meant for kids, because they're inexpensive and built to take a lot of abuse

What you do:

Spread all the materials out in a big pile on a table.
Give everyone a piece of cardboard and a magazine to get them started.
Read the instructions, shown below. Don't get stuck on clarification, just get started.

Give people enough time to flounder and then get started on their own. The leader, of course, must also do the exercise. People will likely need at least 20 minutes on this part.

You should have a lot of paper mess on the table once this gets rolling. [That's what the garbage bag is for.]

When everyone is about finished, invite people to hold up their collage and share their ideas. Plan on  3 - 4 minutes for each person. You may be surprised at how much discussion this triggers, so plan for lots of time on the debrief.

As the leader of the group, ensure that the discussion stays positive. This is about wishing and dreaming, not about logistics. You don't have to know how the wishes will be achieved to share them.

Plan to keep the collages. People may want to post them in their own work area, or put them up in a central place together as one giant collage.

Verbal instructions:
Flip through the magazines looking for images or words that capture your ideas about what we could be in the year ahead. Don't overthink it. Just start tearing out images that seem to relate to the year ahead, and your ideas about what we could be or become or achieve. Don't limit yourself to any one area -- you could be thinking about how we work together, how we treat customers, how we innovate, or anything else that seems to fit.

When you have a good pile of images, start cutting and pasting these onto the folder. Add any words or drawings that help to illustrate the thought or bring the idea to life.

Tell people this is not about artistic ability, it's just a way to liberate some creative thinking and ideas about the year ahead.

The results:

When we can clearly picture a goal or a desirable outcome, it's much more likely to happen. You might have encountered this concept as a dream board for personal planning. There are many possible variations.

The worst case? You'll have a high energy meeting to start the year, instead of a deadly dull one.

If you try this, please come back and add your comments to let us know how it worked, what you tweaked, etc.

And happy new year!

Resources:

More on dream boards here on WikiHow and here on EHow

The decline of Wal-Mart: skewered on the purity of their customer experience

Wal-Mart had a reputation for making suppliers and business partners jump through hoops. Someone who regularly experienced this once told me, "they aren't happy unless they think we're doing the impossible." That era is coming to an end, if it's not already over, according to Gary McWilliams, writing for the Wall Street Journal.

"American shoppers are increasingly looking for qualities Wal-Mart has trouble providing," says Mr. McWilliams. "Consumers are demanding more freshness and choice, as well as more personalized service."

As is so often the case in life and in business, we are skewered not for our sins but for our virtues. And it is Wal-Mart's down-market, low-priced, accessible, mass-appeal image that is part of its problem, when shoppers are seeking higher quality and uniqueness. More than many organizations, Wal-Mart's brand concept and their customer experience are very closely aligned. That too is part of their weakness now. 

Various competitors have added services -- anathema to the Wal-Mart model -- to support their growth. Examples cited by Mr.McWilliams include Walgreen putting basic health services in their pharmacies and Best Buy offering installation services.

Major packaged goods providers are actively trying to reduce their reliance on Wal-Mart. According to the WSJ article, for Procter & Gamble, this means their Wal-Mart related revenue has dropped from 18 per cent to 15 per cent since 2003. Big bucks indeed.

The truly shocking evidence of a change in the landscape is Wal-Mart's inability to force others to do business in a specific way. Mr.McWilliams reports that Wal-Mart asked all major suppliers to put RFID (radio frequency identification) tags on products, but backed away from the mandate when faced with resistance.

I see from Wal-Mart's online shopping site that they are trying to offer such things as jewelry personalization. OK, it is a family ring, but at less than $50, I bet they sell a lot of them. So we shall not write off Wal-Mart just yet.

Resources:

Wal-Mart Era Wanes Amid Big Shifts in Retail. Rivals find strategies to defeat low prices; world has changed, by Gary McWilliams, Wall Street Journal, Oct.3,2007.

How the world changed on Wal-Mart. After years of dominance, the big-box titan is scrambling to keep up wtih swifter rivals that are redefining the business, by Gary McWilliams, Globe & Mail, Oct. 3, 2007.(Print edition)

We recently wrote about Wal-Mart's decision to reduce their direct customer contact for internet shopping. Customer contact reduction: is Wal-Mart on brand with this program?

The latest news on multi-tasking and what it means for customer experience

Luth Research recently released their IndicatorEDG report on multi-tasking. It looks like we are spending more and more time -- on average, 20 hours a week -- attempting to do two things at once.

"On average, 17 percent of our time awake -- approximately 19.80 hours per week -- is spent using two or more media simultaneously, according to the latest quarterly findings (Quarter 1, 2007) from Luth Research's IndicatorEDG™, an online study surveying more than 5,000 respondents in the U.S. The media in question included all mass media (e.g., TV, radio, Internet) and personal electronic devices (e.g., cell phone, MP3 player, wireless email device)."

Those who aren't employed spend more time in media multi-tasking -- no surprise there. But so do retired people, who average close to 26 hours a week in media multi-tasking. [So your suspicions are correct -- Mom or Dad really are watching the TV while talking to you on the phone.] 

And most of this media multi-tasking is TV together with something else --

"Watching TV was named by nearly half of the respondents to be what they typically do
when working on the Internet or email through a computer. One in five people have their TV on while using their cell phone to make phone calls. TV seems to be a natural fit to co-own consumer time and space with other print media, as 20 percent of the respondents cited TV as the medium they were also using when reading a newspaper, a magazine, or a book."

Those that are spending more time media multi-tasking report that they are less happy overall than others.*

What does this mean for customer experience and customer communications?

If you thought it was hard to get people's attention before, guess what? It's going to get harder. So clarity in all communications is essential.

In these circumstances, is it realistic to expect people to absorb the fine print, or read between the lines of your offer?  Probably not, in my view.

Greater redundancy in communication is also a good idea. Don't assume people are actually informed about your policies or product features or hours of operation. Make it clear, easy to find, and say it often.

If it's directed at anyone who is retired, make the print on the box big enough to scan at a glance, because that might be all it gets.

And your advertising had better be interesting enough to compete with other media. Even if it's only getting half an ear or half an eyeball, it needs to get a message through.

Resources and notes:

Here's the link to the five-page PDF report: IndicatorEDG Research: Media Multitasking

* Note that this should not be construed as a cause -- perhaps the multi-tasking is a response to other life circumstances, which are the underlying cause of the unhappiness

Vendor Relationship Management -- what the heck is it?

Vendor relationship management -- VRM of course -- is something new on the technology horizon.

"VRM provides customers with tools for engaging with vendors in ways that work for both parties."

As a definition, this is a bit vague, but a look at some of the ideas this group is bandying about is helpful. The idea is to create tools that help empower individual customers / consumers / viewers etc. to manage out from ourselves our needs and wants, thereby giving us better tools to support our recent empowerment in the information age. So instead of just feeling empowered and overwhelmed, we feel empowered and in control.

There's a very good diagram here that helps to understand how a VRM system might work.

Examples of VRM

• Instead of having to deal with telemarketing and mail efforts to support public broadcasting, perhaps having provide us with a way to donate directly on our own, revealing only what we want to reveal. This one is a project of the VRM Project at Harvard (see resources below)

• Being able to generate offers -- sort of like consumer RFPs, but less cumbersome -- instead of lead generation. So perhaps I could put out an offer for a bookkeeper, or a house painter, for example, and be able to effectively manage the responses to that. I would identify myself as a lead, and vendors would respond to my offer

• You want to buy a server, so you use Technorati tags to identify your needs and the stage of your purchase, and monitor the incoming expressions of interest using an RSS reader

Essentially, VRM feels like it could be like a want-ad on steroids, a combination of Craigslist and virtual agent. We never really got CMR (Customer Managed Relationships), we got stuck with somebody else's CRM. So we can't really tell them what our needs are, what segment we are in, or anything else that might help both parties. We have to engage on the terms of the vendors only.

VRM is a concept about creating the tools to turn this CRM/lead generation formula upside down.

It reminds me a bit of the electronic invoicing and payment systems introduced first in the 1980s by companies like GM, and embraced on a much wider scale in the early 2000s. Companies were faced with miscellaneous invoicing formats from their thousands of suppliers, and were forced into a very inefficient process. Technology changed that, ultimately for the benefit of the suppliers and the buyers, although it was the large buyers who drove the development and adoption of the process. Just-in-time inventory really only became possible because of the infrastructure established around invoicing and payment, which could then be extended to ordering.

Zopa and Prosper -- the non-bank intermediaries in personal lending -- clearly share some genetic material with the VRM meme.

All rather exciting. And just when you thought the information age was starting to look mature and predictable. Surprise!

Resources:

Thanks to the Computer Assisted Management for Performance list at GoogleGroups for the heads up on this.

The Harvard VRM wiki portal is here, hosted by Harvard's Berkman Center for Internet & Society, and led by Doc Searls. The public broadcasting VRM initiative is here.

The RFP idea came from Phil Windley, here.

The server purchase example came from Don Marti, here.

More examples of other people writing on this idea are here on the wiki.

Extracting value from your customers: Companies and the customers who hate them

Fantastic must-read article in the June 2007 issue of Harvard Business Review: "Companies and the Customers Who Hate Them" by Gail McGovern and Youngme Moon.

McGovern's thesis is that many otherwise great companies have drifted into a situation where their most-profitable customers are the ones who have the most reason to be dissatisfied -- customers who are trapped by a contract, or pay too much because of complex service plans and penalty fees. 

Sounds all too familiar, doesn't it?  But I'm raving about this article because of the clarity with which the situation is presented, and the thinking it triggered for me. McGovern suggests this situation is the result of drift, not malice:

"Without ever making a deliberate decision to do so, they have, over a period of years, taken great advantage of their customers. In most cases, there's no defining moment when these companies crossed the line. Rather, they found themselves on a slippery slope that led to an increasingly antagonistic strategy."

The industries that exemplify this approach are cell phone service, retail banking, and health clubs. Service plan contracts, for example, may appear customer-centric at first glance, but in fact take advantage of the "customer's difficulty in predicting their usage." If customers use too much, they pay more. If they use too little, they paid for something they aren't using. Regardless of the direction of the error, the house always wins.

Competitors that enter this kind of environment with transparent offerings often do well, rapidly growing their customer base: Virgin Mobile in cellular, ING Direct and President's Choice Financial in banking, for example.

McGovern & Moon's diagnostic questions:

McGovern offers four diagnostic questions to discover how seriously affected your business is by this approach:

⇒ Are your most profitable customers those who have the most reason to be dissatisfied with you?

⇒ Do you have rules that you want customers to break because doing so generates profits?

⇒ Do you make it difficult for customers to understand or abide by your rules, and do you actually help customers break them?

⇒ Do you depend on contracts to prevent customers from defecting?

Abbott's addendums:

I'd like to add a few more diagnostic questions to this list that are a little more granular. All of these are based on personal experience as a customer or a consultant:

⇒ The cost of doing business WITHOUT being in a service plan is prohibitively high. A lot of calls to your bill-payment lines result in back-dated conversion to a service plan, and reversal of 'pay-as-you-go' charges. The staff in this area are rewarded for sales of this nature. Good example: bandwidth charges on mobile phones

⇒ You have complex online tools to help customers select a service plan. They need to be able to accurately predict their usage to use them. The tables and charts have footnotes explaining the exceptions. Examples are abundant: bank and telco web sites

⇒ You recommend that customers bring several statements in to your offices to talk to a specialist to help them select a service plan, because it's too difficult to do without accurate data. Commonly seen with: banks, phone companies

⇒ Your own staff find the whole area confusing. The good ones offer to switch the customer's plan with no charge in a few months if they find they have chosen the wrong plan. Commonly seen in: new customers selecting a bank account

⇒ The cost of 'making a mistake' is so high that you are able to sell insurance against 'making a mistake' even to those who have never made one, or are unlikely to. Good example: overdraft protection

⇒ You can accurately predict the 'breakage' on typical products. In fact, you count on this ability to build profitable new products.  e.g. Minimum balance requirements, credit card insurance with low claim rates

⇒ You rely on customer inertia and hassle-avoidance to reduce churn. Hello cable companies with bundled channels and complicated high-definition set-up

There are abundant examples in these industries. In fact, it is so entrenched, you might find it difficult to even think of alternative approaches.

How to start fixing the problem

Changing service-fee strategies usually means someone has to prepare a business case. Resolving the kind of issues that the McGovern and Moon article is discussing is going to mean a drop in revenue from fees. Regrettably, that drop in fee revenue will be easy to quantify, while the resulting gains in loyalty and brand equity are likely to be much harder to quantify.

If you want to start addressing this situation in your organization, you are going to need metrics that help put some numbers on the other side of the equation. You would be well-served to get the support of whoever is managing loyalty, retention and churn, as well as brand equity.   

When I'm conducting research in any of the industries named above, a recurring theme is the feeling that the deck is stacked in favor of the company, not the customer. And I have a news bulletin for you: training your staff in being friendly isn't going to get you past this issue.

If you've had some success changing this game, please tell us about it in the comments.

Resources

Harvard Business Review does not provide free online access to its material. Individual articles can be purchased, however, and it provides a short summary of articles. Companies and the Customers Who Hate Them by Gail McGovern and Youngme Moon can be found here. (Product# R0706E)

Apple's New Phone: How will they manage the partnerships?

I know the world is pretty excited about the Apple i-phone. But I'm going to be a wee bit skeptical about one thing here.
Past Apple successes largely relate to areas where Apple could fully control the customer experience.  Even with music, they set up their own delivery system with i-Tunes.
This time, Apple will need to rely on working with Telco's, who are notorious for being irritating to customers.
Here's what I mean: I hve a nice Razr Camera Phone. It should be able to download pix to my laptop via a cable. But my telco shut down that capability, because it wants me to use their cumbersome e-mail system. The first time I did it, it cost about $90.00. [That's not a typo] That was something like $.50 for the picture, plus a $52.50 per megabyte charge for the bandwidth. [That's not a typo either]. 

But I could sign up for a $20.00 a month package that would give me unlimited downloads. So of course I did. Now I'm paying $240.00 per year for a function that was built into the hardware. But wait... there's more!!!!

The installation of this service package on their end disrupted the integrated voice-mail between my land line and my cell phone. A mere five phone calls, several hours of holding, and more than a week later, I got my voice-mail back. No apology, of course. I'm actually simplifying this story considerably, believe it or not.

And this is the network that Apple's new baby will be entering. Hence my skepticism. I hope I'm wrong, and this event will mark the beginning of a new, customer-friendly era in telecommunications. Any thoughts, dear reader? Will Apple be able to make this work?

Taking a customer-centric view of the world

I attended a roundtable session earlier this week where a guest from HP talked about their marketing strategy and their competition. HP operates in a complex world, where they have tiny customers, and massive customers, and they sell things that are relatively simple, as well as enterprise solutions that are tremendously complex.

The speaker did a great job of explaining their view of the market segments, and how they are trying to integrate. Some very nifty video, btw, which I'll post on tomorrow.

One of the charts presented made me ponder how we tend to define a given market from our own perspective, not from the customer's perspective. We define the product or service categories more or less based on our own product and service line-up.  So we see a chart that has our own organization with an X in every row, just like the first chart above.  And we then look at the competition from the same perspective.

Our customers and prospects define the market and competition in terms of all their needs and potential needs. Their chart looks more like the chart below, where no one company can meet all their needs. 

The implication of this, of course, is that we wind up sounding like simpletons when we address the customer's requirements, because we ignore the ones we can't help with.

When you think about your competition, think broadly. Think in terms of your customer's view of the world. It's not fast food, it's food. It's not CBS versus NBC, it's entertainment. This does complicate things, of course. But it will get you to a better place.

RSS, a new medium?

Feedburner CEO Dick Costolo was interviewed in Business 2.0 (July 2006 issue), and had an interesting perspective on where RSS is going, and the future of push.

RSS -- or really simple syndication -- is how you are reading this post, unless you got it via e-mail, or surfed here directly. While it is closely associated with blogs, it's really useful for any content-rich environment that updates regularly.

Costolo really caught my attention with his take on media trends: that initially publishers tried to use the web to drive print subscriptions, and it didn't work well. Now they are trying to use RSS to drive traffic to their web sites, but that won't work either, because RSS is a new medium.

"The new medium never drives dollars to the old' it drives dollars to the new thing."

I think he's right. Which means that the importance of web content by itself will tend to diminish.  People are not going to keep revisiting your web site to see what's there that might be new.  They'll find out what's new when they choose to syndicate your feed, and you send them something new.

Of course, in this expanding world of communication overload, you need to have something pretty interesting to say if you want anyone to tune in.  Authentic, transparent, and helpful. And maybe you can bundle some advertising messaging in there.

Trends for 2006: pod-casting, time-bound experiences, and satellite radio

Maybe podcasting does make sense?  I didn't really think so, until I received an i-Pod Shuffle for Christmas.  Now I'm wondering why my local museum won't let me download the audio onto my Shuffle before I get there.  And thinking about the role of advisors in satellite radio.  Permit me to explain...

Time-bound experiences

More visual art than auditory art can survive over the centuries, because it is possible to experience it faster.  You can listen to far fewer symphonies in your life than you can take in paintings and etchings, for example.  One result of this situation is that the only the best music and theatre survive the centuries, and the mediocre is generally lost.

 

Your work just got more difficult

What happens to work when you try to integrate customer experience across the business:

Managing the customer experience is making management work more complex

In the organization of ten years ago, it was okay for different lines of business to treat the customer in a non-integrated way.  If marketing and operations didn't see eye-to-eye, it was sub-optimal, but perhaps not essential.  There was no need to co-ordinate the online and offline experience, because there was no online experience in most businesses.

Today, the need to co-ordinate the customer experience smoothly across several lines of business has increased the complexity of work.  More factors need to be taken into account in making decisions.  More people and points of view need to be taken into account.   Roles that required Senior Manager skills and capability a decade ago now require Director level skills and capability.  Roles that used to be competently handled by a Director now require a Vice-President.  This is not title inflation, and it's not about a lack of good people...it is a real phenomenon.

The New Orleans Example

A real life example will help to illustrate what I'm talking about.

When New Orleans was having its Katrina crisis, a few unfavorable comparisons were made between how New Orleans mayor Ray Nagin was handling things, compared to how Rudy Giuliani, mayor of New York City during the 9/11 crisis handled things. 

These comparisons were completely unfair to start with, of course.  New Orleans was a city of about 500,000 people, and the greater New Orleans metropolitan area had about 1.4 million people.  New York, on the other hand, has about 8 million people in the city proper, and 18.3 million in the metropolitan area, and is the largest city in the USA, and among the largest in the world.  New York is a driver of the global economy; New Orleans is not. 

It's safe to say that the job of mayor is more complex in NYC than in NO, even when everything is working more or less fine.   In fact, we might suspect that being mayor of NYC is as complex as the CEO role in a major corporation.   And we might suspect that being mayor of NO is as complex as being the Vice-President of a function in a major corporation -- such as the head of sales for a region.  Indeed, before Mr. Nagin became a mayor, he was vice-president and general manager at Cox Communications.

What happened to Ray Nagin's job when Katrina hit

Ray Nagin's job became massively more complicated overnight.  And so did the jobs of many of the people who were supposed to be helping him.  Suddenly, he needed to coordinate many more lines of information than he was likely used to coordinating.  He had to consider decisions with extremely long range impact, making trade-offs that affected whether people lived or died, and would affect the local economy for decades to come.  And he had to make many of these decisions very rapidly in an atmosphere of very little hard information and tremendous uncertainty. 

Mayor Nagin's job went from a VP level job to a CEO level overnight.  Looking at the chart above, Katrina was the precipitating event that occurred at the arrow. 

Rudy Giuliani was either already operating at this high level, or he was "ready for a promotion".   And he himself has argued that the 9/11 situation was more manageable than New Orleans after Katrina, because it was contained.  He may not have known that at the time, of course. 

A merger is like a hurricane

A merger is a lot like a hurricane or a flood -- suddenly there is a lot less certainty and a lot more information to deal with.  People who were functioning at a high level in their role pre-merger may find themselves swimming over their depth after.   Did they suddenly become incompetent?  Not likely.  More likely is that the work suddenly became a lot more complex.  Not just more of it, but qualitatively different in substantive ways.

How Customer Experience fits in

The advent of cross-functional teams were the first big organizational effort to find a way to manage work that requires integration across lines of business.  Here's the problem:  it isn't about teamwork, it's about information complexity. 

When the operations people can't deliver the brand promise that the marketing people think is needed, you need to go up a level in the organization to address this issue.  The thing is, this kind of issue is no longer isolated, it is ongoing and pervasive. 

Customer experience is the internal response of an individual to their interactions with an organization's products, people, processes and environments. 

Integrating across these dimensions is much more complex than managing within one dimension.  And we need to integrate more often and more effectively to compete successfully.  This is the real reason that many managers' work lives are a parade of meetings sandwiched between marathons of e-mail reading.  It's not because they are terrible at time management -- it's that a tremedouns amount of coordination is required to create a differentiated customer experience that feels integrated and seamless to customers.

Take a look at who is thinking about customer experience in highly successful businesses.  You'll often find that it is placed very, very high in the organization.  Steve Jobs at Apple is a fine example.  He's apparently leaving the financial engineering to someone else, and focusing on integrated brand experience. 

Maybe you think I'm stretching a point here.  Perhaps you'll believe AG Lafley, CEO of Procter & Gamble, who says that the way work is organized has changed.  It used to be organized along functional lines, but now, the importance of design has created a need for greater coordination. 

On the one hand, design is simple. On the other hand, it didn't fit in the way branded consumer products companies work and are organized. I've been in this business for almost 30 years, and it's always been sort of functionally organized, you know, marketing, product development, manufacturing, and sales. Where's design? The answer is, in all of the above. [Fast Company, "Designing Innovation"]

To create products that provide a really great customer experience, leading organizations are turning to design.  But design is pervasive: it is part of process, it is part of environment, it is part of product, it is part of the way people behave when they interact with customers.  Design is an essential skill in creating customer experiences that drive results.   But you can't put it neatly into a functional department.

My take

If you feel like your work is a lot more complicated than it used to be, you're right.  It's not about bureaucracy.  It's because the work itself has become more complex.  Start to accept that, and your life will be a lot less stressful.

The work of coordination across functions is executive level work.  Managing an integrated customer experience is not a marketing function, an operations function or a sales function -- it touches all of those functions. 

Senior executives need to understand that customer experience and brand experience cannot be delegated very far down the organization chart.  You need to pay as much attention to this stuff as you do to compliance.  Fortunately, managing customer experience is a heckuva lot more interesting than compliance. 

Examples of Comparisons of Nagin to Giuliani:

Washington Times: New Orleans Mayor no Giuliani

Thomas Galvin - A Tale of Two Mayors

Rebuilding New Orleans: Nagin Overwhelmed, Blanco an Embarassment

Does Your Strategic Intent Deserve Personal Effort and Commitment? Or Are You Guilty of the Seven Deadly Strategy Sins?

I've heard enough definitions of a mission statement to fill a stadium, and I bet you have too.  You might find it easier to cope with the concept of "strategic intent", which I picked up from the July/August issue of HBR, in an article by Gary Hamel and C.K. Prahalad called Strategic Intent *. 

It cleared some dust from my summer-fogged brain, and got me thinking.  It's worth reading the whole article for a number of good nuggets, but here's the part you should think about starting today:

"Strategic intent sets a target that deserves personal effort and commitment"

The authors note that the goal of "maximizing shareholder wealth" is not something we all think about in the shower, because it isn't very mobilizing.  Compare it to the examples they use of Canon ('beat Xerox') or Komatsu ('encircle Caterpillar').   

I used to work in a big company.  When I got promoted to the point where I interacted occassionally with senior executives, some real alarm bells went off for me.  I remember hearing one declare our corporate mission to be "having the best efficiency ratio in the industry". 

I knew this would not mobilize the few hundred people that worked for me.  Heck, it didn't even mobilize me.

(You don't have to be a global business to have an energizing strategic intent.  I commissioned some coffee mugs from Lucky Rabbit earlier this year; when they arrived, they announced their mission as the creation of everyday treasures.   And they are.)

The article clearly demonstrates how too much focus on the existing competitor landscape and existing company capabilities prevents reaching for real leadership.   A lot of strategy tools that we use don't help matters:

"It is not very comforting to think that the essence of Western strategic thought can be reduced to eight rules for excellence, seven S's, five competitive forces, four product life-cycle stages, three generic strategies, and innumberable two-by-two matrices." 

..."Moreover, even reasonable concepts like the product life cycle, experience curve, product portfolios, and generic strategies often have toxic side effects: They reduce the number of strategic options management is willing to consider.  They create a preference for selling businesses rather than defending them.  They yield predictable strategies that rivals easily decode"

This article was first published in 1989, but I found a surprising resonance with today's corporate dynamics ... just substitute the names of the companies they mention.

Seven Deadly Strategy Sins

The key points that captured my interest amount to a list of deadly sins, still with us long after 1989, and worth meditating upon as you face the mirror every morning:

1. Executives hope to motivate people with mission statements and corporate goals that are not motivating, not exciting, not ennobling, and often seriously dull
2. When organizations are overloaded with initiatives, executive credibility suffers along with effective execution
3. Executives need to share "reciprocal responsibility" with employees -- both the pains and the gains.  This means sharing the truth about what's going on in a meaningful way at every level of the business
4. Organizations that measure only on ROI encourage management to focus on moving the denominator (level of investment) down, not the numerator (revenue) up, leading to a cycle of downsizing that ultimately erodes value
5. Too much focus on inflexible SBU (Strategic Business Unit) organizations can favor outsourcing instead of development of core competence, resulting in less organizational learning, and ultimately less ability to compete.  (Yup, been there too.)
6. Moving managers too quickly between assignments encourages either abandonment of long term development of capabilities in the business, or attempts to jam long-term development into short time horizons, typically with acquisitions 
7. Focusing too much on the strategy hierarchy of corporate goals --> business unit strategies --> functional tactics fosters an elitist view of management and "tends to disenfranchise most of the organization".  Yes, there needs to be coherence, but not at the cost of ignoring all the brains that aren't in head office

Strategic intent:  What's yours?

PS.  You can't get people focused on building a better customer experience with a strategic intent that has some sort of feeble "shareholder wealth" mantra.  And that's why it's in this blog.

* Yes, you have to buy the article, unless you are already a subscriber.  However, there is a nice summary at this link, if you scroll down to the bottom of the page.