Archive for March, 2009

IT is a key weakness of joint ventures… and any collaboration

Tuesday, March 31st, 2009

Strategy + Business, the Booz & Company journal, just published an article discussing the results of a survey on information technology in automobile joint ventures. Booz’ conclusion: JVs systematically underinvest in IT because of cost pressures, difficulties in standardization and security.

Please read the article and come to your own conclusions. For me, it brought up an issue I’ve faced a lot recently–the IT disconnect between a company’s direct employees and the consultants it uses. When I’ve been in collaborative projects with companies, the lack of easy access to scheduling programs, file stores, and document management systems has been ubiquitous. The IT groups don’t want some temp to take up a lot of their time with nonstandard hardware, unknown applications, and other difficulties. So, they leave it up to the outsider to get along without the proper tools. Ironically, free or cheap off-the-shelf tools like Ning, Google Docs, Basecamp, etc., are far superior collaboration tools to those provided by the corporate IT shops I’ve worked with.

Companies’ value chains are becoming more and more unbundled. There’ll be a great deal more difficulty collaborating with partners as that happens. Corporate IT groups will have to radically change their approach to remain relevant.

Related:
Corporate IT Maximum Security is Damaging Innovation

The “Values Proposition”

Tuesday, March 31st, 2009

The term “value proposition” has been in vogue in business-to-business sales for twenty years or more. In short, it means that a product for sale must, in essence, create more money (in increased revenue or reduced costs) that it costs to purchase. “If you buy my widget for $x, you’ll get $5x back over the next 10 years,” or something like that.

The value proposition is a very logical concept. That is its beauty and its limitation.

While many companies are aware of their value proposition to customers, few if any know their “values proposition”: the collection of things about the company and its products & services that customers value (along with the things they don’t value or which customers see as negative).

The values proposition is the underpinning of the customer reference. When companies are asked “why would you/wouldn’t you recommend a company or product?” they respond with answers informed by deep, emotional reasons like “they save me time,” “they make me smarter,” “they are available whenever I need help.” If you have happy customers, you have a values proposition too. Do you know what it is?

We’ve helped companies define and understand their “values proposition.” Contact us at inquiry@caddellinsightgroup.com if you’d like some help finding out yours.

Thinking about processes as “science” and “art”

Monday, March 30th, 2009

One of my most gratifying but ultimately unsuccessful work assignments was to create an offering to open up an attractive new market segment. It was gratifying because many things went well–we developed a strong brand, quickly took up a position of authority and insight, and sold several important deals. It was unsuccessful mainly because we struggled to deliver the deals we’d won. The operations team, rather than celebrating these new wins, came to dread them. They wanted more certainty and definition–I countered that this was new stuff which we couldn’t pin down yet.

I was thinking about this experience while reading “When Should A Process Be Art, Not Science?” in the March 2009 Harvard Business Review. The authors, Joseph Hall and Eric Johnson of the Tuck School of Business, argue that while many processes benefit from a scientific, methodological approach (such as McDonald’s formula for frying burgers), other processes defy standardization and, in fact, are better off not being standardized. The authors call these “artistic” processes and cite such widely dispersed examples as the creation of a Steinway piano, auditing, and customer service. Complex sales, channel management, new business development, requirements gathering are other examples of artistic processes.

Most simply, Hall and Johnson call artistic processes those with high variability and, crucially, value of variability to customers [in this case also meaning internal customers]. In other words, a process that yields different results to a customer that wants consistency isn’t an artistic process, it’s a mess.

The “artistic process” argument parallels the definition of the Cynefin framework, defined in Kurtz & Snowden’s paper “The New Dynamics of Strategy: Sensemaking in a Complex and Complicated World” and discussed in Snowden and Boone’s 2007 HBR article, “A Leader’s Framework For Decisionmaking.” The scientific processes defined by Hall and Johnson fit into Cynefin’s Known or Simple domain, while the artistic processes sit in the Complex domain.

Six Sigma adherents would claim that the segmentation of processes into scientific and artistic subsets merely excuses obstinate “artists” who don’t wish to constrain their freedom by submitting to any defined process (salespeople and sales managers are frequent targets of this accusation). Helpfully, Hall and Johnson discuss how they would propose measuring artistic processes–by harnessing customer feedback. They write:

An artistic process has to rely on external measures of success. Artists need continual exposure to customer feedback, which prevents them from constructing their own idiosyncratic notion of quality. Sometimes this feedback must come from a broad swath of customers. For example, medical professionals obviously have to work closely with all afflicted patients to diagnose and treat complex diseases – to obtain a complete picture of their symptoms and track their reactions to remedies. With other processes, including those used to product Steinway’s high-end pianos, feedback from a select group of customers can suffice.

Meaning: to check how you’re doing on non-mechanized processes, it is necessary to query the customers of the process and draw conclusions from their feedback about the process’ effectiveness. This means getting deeper feedback than we are accustomed to. For sales, it means not only tracking that a deal was won or lost, but why it was won or lost, and what could/should have been done differently, in the customers’ eyes. A lot of the work I’ve been doing in the past year has focused on this–measuring how a company is doing in telesales, or customer service, or account management by gathering customer stories and finding patterns in them revealing what customers value, or deep issues they have. [Now I have more help to describe the value of this work!]

Back to my new-business assignment. In looking back on that experience, one serious issue we had was the collision of artistic processes (marketing, sales, solution development) and scientific ones (operations, call center management, etc.). What seemed at the time to be misunderstanding or lack of teamwork may have been a poorly defined interface between the artistic processes of innovation and business development and the scientific ones required to deliver value to real customers.

Related posts:
Buyers, tell companies why they lost your business
Leaders need to manage complexity

(Photo by a hundred visions and revisions via Flickr Creative Commons)

Report from Silicon Pasture

Friday, March 27th, 2009

I’ve taken to calling my local area Silicon Pasture, because there are a lot of dairy farms around, and, surprisingly, there’s a vibrant tech community as well. I didn’t know that when I moved here. I came here for a job and to be closer to family. But in the last couple of years I’ve gotten to know folks in the tech community in South-Central Pennsylvania (Harrisburg-Lancaster-York) and am impressed with what’s going on here. It’s a testament, I think, to the anytime-anywhere-anyscale opportunities the web affords to people who have good ideas and the skills and determination to carry them out.

I’ve known Treff LaPlante at WorkXpress (Twitter: @workxpress) for a few years now. I’ve always been impressed with his no-coding enterprise-app building platform, and now, with release 2.0 coming out in April, his company is starting to attract some serious attention. WorkXpress is one of the many interesting companies launching out of the Murata Business Center incubator in Carlisle.

The guys at CoTweet (Twitter: @cotweet), out of Lancaster, “have a tiger by the tail,” to use a term I tweeted at them earlier in the week. Their browser-based tool to help companies manage multiple Twitter accounts and multiple users of those accounts (dubbed by Jeremiah Owyang of Forrester Research “CRM for Twitter”) is still in private beta, but has gotten early adoption by companies like Ford, Best Buy, Intuit and JetBlue, and has gotten raves from social media icon Guy Kawasaki.

Listrak (Twitter: @listrak), from Lititz, near Lancaster, is a fascinating company that has built a high-performance email marketing platform attracting top-tier customers such as the Boston Symphony Orchestra, Waterford Wedgwood and the Bahamas Tourist Office. The company also shares its email marketing expertise with its customers via user groups, webinars, blogs and (of course) email newsletters. So, in addition to providing a great technology platform, they also make their customers smarter.

And now, with the opening of the new downtown high-rise home of the Harrisburg University of Science and Technology, the area finally has a university anchor to support its tech entrepreneurs. All in all, it’s an exciting time here in Silicon Pasture. I’ll keep you posted on developments.

[Disclosure: I've worked with folks at each of these companies, sometimes paid but mostly not, on strategy, customer research and rollout questions]

[Photo by marrit via stock.xchng]

Customers are talking – opening your company up for customer dialogue

Thursday, March 26th, 2009

I recently recorded a podcast with Sydney Finkelstein of Dartmouth’s Tuck School of Business about his book “Think Again: Why Good Leaders Make Bad Decisions and How to Keep it From Happening to You” (shameless plug: you should listen to the podcast if you haven’t yet. It covers how tricky it is to make sound, reasoned decisions in our complex business world today).

After I posted the interview, I asked Syd what he thought of it. At the end of his response, he threw this in: “I appreciate your asking for feedback – not common.”

And over the past few weeks that sentence has stuck in my mind. It is very difficult for individuals to solicit and act on candid feedback. Companies, made up of individuals, have the same problem. There’s a self-protective impulse that wants to distance ourselves from criticism and harm.

Companies do solicit feedback, all the time. It’s just that, in my view, they rarely do it wanting to get the real story. They use it as PR (”see what good listeners we are”), as a way for customers to vent, or as a way to mine success stories. They don’t really want to know the candid truth, the bad stuff.

Netflix is an exception. They are constantly asking me what I think about their service. For Example:

Dear John,

We are always making improvements to ensure you receive your movies quickly. As part of this process, we ask our members about how we are doing from time to time. Please tell us when you received The Blue Planet: Seas of Life: Ocean World / Frozen Seas, which was shipped to you on Monday, Mar 23, 2009 by clicking on the appropriate link below….

Or this, after we used their streaming video service:

Survey: How Was the Picture and Audio Quality?

Dear John,

You recently watched Pokemon 3: The Movie. To help us ensure a great experience for all members, would you take a moment to tell us about the picture and audio quality?

They’re simple surveys and take only a moment to fill out. I do it religiously, in part because I’m happy they asked. And something, perhaps Netflix’s culture, the tone of the emails, etc., makes me feel that they act on this information. It’s not only for me to vent.

I would encourage Netflix to add one thing to these surveys–a text box, where users could add any feedback they wished. In interviews I’ve done, I’ve found that this question: “Is there anything else you think we should know?” often yields the most surprising and insightful information from customers.

Aside from this, Netflix handles the customer dialogue just about perfectly, in my view. No other company I know of has a similar continual, open, candid line of communication with its customers (if you have good examples, please add them in the comments; I’d love to compile a full list).

Does your company want to engage in a dialogue with its customers?

If so, ask yourself this: do you really want to hear everything? If so, customers are ready to tell you.

Related posts:
Buyers, tell companies why they lost your business
Netflix demolishes own business model
Candid customers won’t give you 100%

[Find a compendium of "Customers Are Talking" posts here.]

Can a commitment to green practices save money? Why, yes.

Wednesday, March 25th, 2009

In yet another example of the power of constraints to create innovation, there’s a fascinating article in the recent Wall Street Journal Business Insight section entitled “Greener and Cheaper.” In it, authors Alan Robinson and Dean Schroeder describe the decade-long effort by the managers and workers at the Subaru of Indiana plant to reduce their use of energy and decrease waste. One accomplishment: the plant has not shipped any waste to a landfill in nearly five years.

The findings of the authors is that sustainable practices can go along with cost reduction and efficiency improvements. But it’s a long process and requires constant focus, attention, and executive support. For example, the Subaru plant has had the objective to be environmentally sensitive since its construction 20 years ago.

It’s not all easy money–many of the projects required process redesigns and/or upfront investments that ate up savings for a while. But there are numerous stories in the Subaru experience where the objective to reduce waste led to sustained creative thinking:

In another case, a series of process redesigns that first increased costs ultimately produced lower costs, less waste — and better quality work. The plant used to weld its steel auto frames in a way that produced lots of sparks, which, in turn, left lots of a waste-metal byproduct known as slag on the floor. Subaru started looking for a company that might want the slag for the base metals it contained. It found a company in Spain that wanted to recover copper from the slag. So, Subaru started shipping the slag to Spain — and paying the Spanish company to take the material. Thus, for a while, Subaru was reducing its environmental impact, but at increased cost.

This led it to consider a previously unrecognized waste: excess sparks. The plant devised a new welding process that produced fewer sparks and less slag, lowering electricity and materials costs. Its consumption of copper welding tips plunged 75%. Subaru still ships some slag to Spain, but not as much. The new welding process also shows how attention to the minutest environmental details can lead to savings that a purely cost-driven organization might miss.

Customers are talking, every day, about their concern for the environment and “reducing the footprint.” With thinking like Subaru’s, we learn that environmental sensitivity does not have to be a premium product. It can, in fact, be cheaper.

Sprint reveals more on its wholesale strategy

Tuesday, March 24th, 2009

Way back in the early oughts when we all thought MVNOs would change the wireless world here in the US, one question we faced was the sheer number of mobile phones people had. “Hey, 75% of people already have cellphones; how are new operators going to build scale when nearly everyone has a phone?”

And the answer was plain to me as I looked around our house. “Hey,” I said to our team. “We have six CD players. Some day we’ll all have six phones, too.”

The MVNO market didn’t take off like we’d hoped, but, as I’ve pointed out a few times recently, wireless wholesale is far from dead. In today’s Wall Street Journal, Sprint discusses its focus on embedded wireless data (”Sprint Looks To Power Gadgets Beyond Cellphones“).

Sprint is the data service behind the Amazon Kindle, as many know, and they’re looking to land more of those types of customers. The Journal article mentions GPS maker Garmin, SanDisk and Kodak as possible integrators of always-on wireless data services.

Customers of Garmin, SanDisk, etc., are strategic because they are net new customers to wireless–in other words, they are like I was when I bought my second (PC), third (another PC), fourth (clock radio) CD players. They don’t have to be lured from a competitive service.

And the article points out that wholesale accounts, while lower in revenue, are very profitable for Sprint:

Analysts say wireless wholesaling generates lower revenue than retail sales but carriers can hold down costs and maintain good profit margins. “They don’t have to bear costs like customer acquisition, billing or customer service,” said Jim Andrew, a wireless industry consultant.

Almost every review of the new Kindle I’ve read mentions its ability to wirelessly download books anytime, anyplace. That feature doesn’t exist without a ubiquitous wireless network. I’m ready, and the market’s ready, for more connected devices like the Kindle.

Related posts:
Time for a humbler, more focused wireless wholesale market
A strategic suggestion for Sprint Nextel (one they seem to be taking up)

Time to “unload the guns” with the finance industry

Tuesday, March 24th, 2009

I took a very good sales training class a number of years ago. The instructor was a French-Canadian guy (let’s call him Jacques) who used lots of interesting expressions, including “platform speaker.” That was his ambition–to some day be a platform speaker (or public speaker), which to this day strikes me as a strange sort of ambition.

Another expression this guy used was “unload the guns.” In sales, after the engagement is over, there are sometimes hurt feelings. Perhaps you went around someone who was blocking your access to a decisionmaker. Perhaps one of the customer representatives supported a competitor of yours. Perhaps you lost the deal. Jacques emphasized that “unloading the guns” was critical at this phase.

By this he meant re-engaging with those people who might have ill feelings or discomfort with you personally (or vice versa), and re-establishing a respectful, working relationship. Unloading the guns is tricky; it means coming to terms with what seems like unfairness, and acknowledging (at least tacitly) that you may have acted in ways that cause the other party to view you similarly. But without this you impede recovery–imperiling the delivery of the deal if you won, or harming your chances to compete for the company’s business another day.

I’ve been thinking about this because of the interesting response this week to the vilification of bankers that we’ve been involved in since the financial crisis began last fall. (I’ve participated in the vilifying.) A headline in today’s WSJ reads, “Obama Dials Down Wall Street Criticism.” And Fred Wilson on the AVC blog posted on the subject yesterday. Wilson reiterates the bad choices made by bankers and financiers that helped lead us here, but also writes:

…there’s plenty of blame to go around; the politicians who created the political environment for the housing bubble, the regulators who didn’t regulate, the borrowers who didn’t think about the ramifications of paying too much and borrowing too much, and I could go on and on.

Not all of us are complicit in the making of this mess but certainly a lot of us are.

And the thing that concerns me is we need our financial system to get us out of this mess.

Wilson is right. Going back to a barter economy is not an option. We need the banking system to support our economy. The government can’t and shouldn’t replace it. And we’ve spent enough time laying blame.

Time to unload the guns.

If your key suppliers are in trouble, so are you

Monday, March 23rd, 2009

When times get tough for businesses, they use the tools at their disposal to manage through till things get better. The tools that can make a difference quickly are blunt instruments that often have detrimental side effects. There has been a lot of creative thinking this time around about the wisdom of one of those tools, layoffs, and possible alternatives.

There is another set of tools that is easily used but which has not received as much scrutiny–shifting some of your issues to your suppliers. The favorite of these is s-t-r-e-t-c-h-i-n-g out payments. Perhaps, rather than paying your raw-materials vendor, or outsourcing provider, in 30 days, you let that stretch to 45, or 60, or more. Perhaps you wait till suppliers lose patience and escalate before you pay, and then, pay only the oldest invoice. You can also dispute invoice items and hope the supplier eventually credits that amount to you. Voila! Better cash flow.

In the current issue of the Wall Street Journal Business Insight supplement, Robert Handfield of North Carolina State University makes a well-reasoned case as to why companies should think twice about trying to solve their problems on the backs of their suppliers (”United They’ll Stand“). In particular, the costs of a significant disruption in the supply chain can overwhelm any savings in working capital due to slow-paying.

Handfield recommends an open dialogue between vendor and customer to ensure that risks to the supply chain (like the vendor’s ability to survive) are identified. He also urges customers to engage more closely with its best suppliers to ensure they have a relationship that will last beyond the current crisis. (In other words, if you want to take out your suffering on your suppliers, you may pay later by losing them.) Finally, he makes the point that times like these are ripe for innovation, including improving how companies and their suppliers work together.

Handfield writes, “The decisions of supply-chain managers in the current crisis may be among the most important they’ll ever make.” Rather than distance yourself from your suppliers, this is the time to bring them close. And that may mean, God forbid, staying current with your payments to them.

“Discovery-Driven Growth” – a vital handbook for developing new business

Wednesday, March 18th, 2009

There’s nothing more fun for me than building a new business, whether it’s a startup or a new line of business within an existing company. New businesses are the life-energy of capitalism, the “creative” part of “creative destruction.”

But like most everyone who’s been involved in starting up new ventures, I’ve endured my share of missed opportunities, strikeouts and horror stories. Anyone who’s been in this business for a while knows there are no sure things.

As a result, it’s been gratifying to tune into the developing literature in managing innovation, whether it’s finding out how P&G does it, how to brainstorm more effectively, or the ever-expanding Clayton Christensen library. And I’ve been eagerly awaiting “Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity” by Rita McGrath and Ian MacMillan.

McGrath’s article “The Value Captor’s Process” was one of my favorite of 2007. And in “DDG” she and MacMillan describe an entire new-business development process using the same pragmatic thinking.

The book, in page after page, honors innovation as a complex process. Failure of new projects is not a result of poor planning; it is a necessary component of the uncertainty of interplaying markets, technologies, customers and competitors. The tragedy of innovation is not failure, it’s risking huge investments and careers before the business learns whether the potential in the venture can ever be realized.

The typical tools of managing innovation have been detailed, upfront planning, hurdle rates and stage gates. By contrast, McGrath and MacMillan propose an iterative prototyping approach to managing innovation: do as much on paper as possible before “breaking ground” on expensive investments; document assumptions and launch inexpensive experiments to validate or refute them; create rough financial models and refine continuously; monitor progress frequently; compare results to expectations; disengage when the likely outcome of the project falls short of alternative uses of capital and resources; extract value from the results of failed projects.

The managers who use the DDG prescription speak almost like acolytes of the Cynefin framework:

As we go into markets where we’re trying to learn, what we’ve gotten better at is trying small things. If they are successful, we spread them like wildfire. If not, we kill them quickly. (p. 162)

And, in the spirit of “giving it away,” McGrath and MacMillan offer all the tools they reference in the book on their website. This lifts “Discovery-Driven Growth” above the level of a book and into the realm of a vital business resource.

Using this approach may not increase the yield of ideas to successful initiatives–as McGrath and MacMillan write, “remember the plan was uncertain to begin with, so there can be no question of failure–how can you fail if you had no idea of the outcome to start with?” But it is certain that a company that dedicates itself to implementing “Discovery-Driven Growth”’s ideas will improve the yield–possibly dramatically–of profit to investment for new ventures.