Innovation: Why is it so difficult to sustain success over time

from Strategy Speaks: a Peppers and Rogers Blog by Don Peppers

Clayton Christensen asked 2 questions in a presentation:

1. Why is it so difficult to sustain success over time (i.e., to innovate again and again)? and
2. Is innovation really as much of a random event as it seems?


His tongue-in-cheek conclusion is that the principles of good management taught in places like Harvard actually sew the seeds of failure and ensure that innovation doesn't succeed.

These are the accepted management principles he faults for the failure of innovation at most firms:
1. You should listen to your customers to develop innovation ideas
2. Focus your investments on those opportunities with the highest margins
3. Outsource whatever possible, whatever is not your "core competency"
4. The value of an innovation can be expressed in net-present-value terms
5. You should ignore fixed and sunk costs, and focus on marginal outlays
6. Large markets represent the biggest growth opportunties
7. Understanding the customer is the key to successful innovation

Disruptive technologies often aren't as "good" as the incumbent technology or product, but are still highly useful to customers. Some innovations make imminent sense in a vacuum but are simply impossible for incumbent companies to do.

ROC: The Logic of the Return on Customer

Has the Time Come for "Return on Customer" At Last?

from Strategy Speaks: a Peppers and Rogers Blog by Don Peppers

 

There is an interesting and well-informed article discussing Martha Rogers' and my Return on Customer metric in the most recent issue of the UK's Marketing Week magazine. David Reed, who covers the "data strategy" beat for the magazine, writes that while the data side of marketing has benefited greatly from a renewed attention to the financial metrics of success, particularly ROI, this might be a short-term blessing for the discipline. What he means is that ROI metrics typically look at campaign or product profitability figures, but have little to say about the long-term value created (or often destroyed) by marketing efforts. On the other hand, he says, the ROC metric does capture long-term value, because it incorporates changes in customer lifetime value (LTV). [Note, please that Martha and I have trademarked the terms "Return on Customer" and "ROC." We grant permission to people to apply these terms to their own analytics efforts when we deem the terms are used correctly.]
Although Martha and I first wrote about Return on Customer in late 2003, our book by that name didn't appear until 2005. We argued that whenever a customer has an experience with a brand he creates current-period, short-term value, by buying the product or costing money to serve, but he also creates long-term value, because the experience itself makes him more or less likely to do business with the brand in the future. We also suggested the simplest way to measure such future value would be to compare the customer's lifetime value both before and after the experience. If he has a good experience, then his LTV will increase, and vice versa, and the amount by which LTV changes represents the long-term component of the value created by the experience. Although there was no shortage of analysis devoted to forecasting customer LTV, until our book came out the marketing community paid little or no attention to trying to understand or forecast changes in customer LTV. But these changes in LTV, by capturing the long-term impact of short-term events, will do the best job of eliminating the short-term bias of more traditional ROI and pay-back analyses of marketing efforts.

10 MUST Customer Management Trends

Customer Strategist Phil Winters: 10 Customer Management Trends to Act on Today

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

 

Customer experience management is a key driver in terms of CRM, but not the only one. Recent developments in technology have unleashed a growing number of new customer management trends. Here are a few of the most important:
1. Consumers assume more and more control over their relationships with the companies they do business with. The challenge for corporations is to continue to delight consumers at every step of the decision-making process for a specific purchase, even when it is not possible to influence it directly.
2. Very early decision touchpoints and interaction between consumers now play a far greater role in the buying process. It's vital to know which touchpoints are relevant for your customers. Consider what each touchpoint means and which "moments of truth" will make a significant impact in the buying decision. Learn what customers are thinking at the early stages of the decision-making process, as well as what influences their buying decisions.
3. Social CRM is becoming integrated into total customer experience management. There is no doubt that social CRM will transition from being a standalone activity to one that needs to be integrated with their existing customer strategies. Determining which social CRM activities make sense for which customer segments - and deciding how to treat those activities - is the key to making use of social media tools.
4. A dearth of experts that truly understand customer analytics will force companies to produce and use customer insights differently. The days when a small team of experts owns the entire customer analytics process are coming to an end, necessitating and paving the way for a more holistic approach that involves more staff, at various organizational levels, in an environment where many can create and gain an advantage from customer insight, not just the chosen few.
5. In-house, outsourced or cloud platform? Technology options will not just be about total cost of ownership. Whether applications, databases, or infrastructure, real alternatives exist. However, the right choice will depend not on a total cost of ownership calculation alone, but also on a determination of how to best use the investment to ensure the take-up, acceptance, and learning throughout an organization, to meet its goals.
6. An increased focus on getting staff to embrace customer centricity. It's all about execution, and not just in marketing. Many senior executives, along with heads of sales and operations, are now realizing how critical it is for all parts of the organization to understand and proactively put the company's customer centricity investments to effective use.
7. Data - capturing it, managing it, making it usable - is now more important than ever. The data challenge has not gone away; if anything, it's gotten tougher. The volume and complexity of a company's various data sources can still mean the difference between a successful and a failed CRM initiative.
8. The focus of direct marketing will continue to shift away from a product push toward customer-optimized interaction. Organizations are quickly shifting to a mentality of getting the "best" action (for themselves as well as for their customers) and demanding a much higher return on their CRM investments. And consumers love the results.
9. Data privacy will shift from being a major roadblock to providing an important differentiator. Data privacy is still seen by many in direct marketing as the great show stopper. But nothing could be further from the truth. With a well-communicated policy, prudent organizations are seeing consumers actually granting permission to use more of their information, as long as it is sensibly done.
10. Customer intelligence will shed its studious, retrospective past to take on the role of informing and instructing an organization's interactive decision points - in real time. Customer intelligence was originally all about taking historical data, collected over time, and creating a few snapshots of "now and in the future." However, new data sources and new techniques are allowing organizations to make fact-based decisions on the fly, without having to wait the typical six to 12 months to gather enough data.

Phil Winters is an advisor with Peppers & Rogers Group. Contact him at pwinters@1to1.com

Customer Management Insights

Customer Strategist Çağlar Gogus: What the C-Suite Needs to Know About Customer Management

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

 

C-level executives have enormous demands on their time and focus. But if they're concerned about the operational performance of their organizations, as most senior executives are, then it would serve them well to pay greater attention to customer management issues, especially on a more granular level.
With the recent economic turmoil, there is a significant loss of trust amongst customers towards several industries. Recent turmoil also reminded regulator bodies around the world to put the customer back on top of the focus for several industries and also for those businesses in which customers are the only source of organic growth. In such an environment, are executives taking ownership of their customers sufficiently?

Why Putting existing customers first is important?

Although unemployment rates continue to remain high and some market sectors, such as real estate, have not yet rebounded, most corners of the economy continue to gain strength. As corporate financial performance improves, many CEOs are focusing on expanding product sales or diversifying into new markets.
That type of thinking is a common knee-jerk approach most decision-makers often make in the early stages of an economic recovery. Ultimately, however, it's a misguided methodology.
The best advice for the C-suite is to avoid the mistakes of the past and shift away from product-centric, short-term financial strategies to a longer-term, customer-focused approach. As consumer spending ticks up, CEOs should be evaluating customer behaviors and attitudes to help them develop a more comprehensive understanding of what customers want from their company and then tailor products to meet their needs. Such a customer-centric strategy, which has paid enormous dividends to companies such as Apple during the recent recession, can go a long way towards helping CEOs achieve longer-term goals and generate sustainable revenues for their businesses.

Customer Interaction: THE MAN WITH THE FOLDING CHAIR

from Strategy Speaks: a Peppers and Rogers Blog by Don Peppers

 

One day a few years ago, a top executive in the German headquarters of Siemens AG was on his way to an internal sales meeting at one of the division offices when he encountered sales manager carrying a folding chair with him into the meeting. Curiosity aroused, the exec asked what was going on, and the manager replied that whenever he brought this chair into a meeting, the whole character of the discussion was different. "Just watch," the manager said, as they both entered the conference room. Several people, including sales reps, were already gathered in the room when the manager brought his chair in, unfolded it, and set it down empty next to his own seat.
"Who are you expecting to join us?" asked several of the sales reps already gathered for the meeting. "Shouldn't we just get some more chairs brought in here?" some others suggested.
"No," the manager replied, "this is my customer's chair. I brought it into the meeting so my customer can sit right here and listen to our discussion." Then, with a nod to the empty chair, he said the meeting could begin. But, as he had predicted, the character of the discussion was indeed quite different from the typical sales gathering. Several times during the meeting, participants found themselves asking whether a particular point would be made in this particular way if the customer were actually sitting there and listening. Would we say this in front of our customer? What would our customer think of our plan for dealing with this issue? How do we think our customer would interpret this new policy? Would our customer agree with us that this is a good idea or not?
In the corridors of Siemens, based on this and other similar meetings, this sales manager became known as "Der Mann mit dem Klappstuhl," or "the man with the folding chair." There's a lesson in this story for all of us: We should be putting the customer's perspective into every discussion we have and every decision we make. Nothing is more important to the long-term health of our business than the trust and confidence of our customers.

The Key to Successful Customer Relationships Is Effective Employee Engagement

Customer Strategist Orkun Oguz: The Key to Successful Customer Relationships Is Effective Employee Engagement

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

 

Products don't generate revenues.
Customers do.


But in order to satisfy customers and build the types of trusting relationships that will help companies maximize their revenue potential, organizations must first have properly motivated and engaged employees.
Employee engagement involves the steps that companies take to capture the hearts and minds of their employees, and motivate them to give their best effort to customers.
You can't become a customer-centric organization until you've become employee centric. Your company is only as strong and effective as your customer-facing staff. There will always be critical moments for your customers that no CRM suite or marketing script can address. Only an engaged, caring, customer-facing staff can handle these types of instances properly.
A highly-engaged employee typically feels more connected to the business and its performance. In fact, according to a study by Hewitt Associates, the level of employee engagement at companies that have achieved compound annual profit growth of at least 10 percent for a five-year period is more than 20 percent higher than at single-digit growth companies.
In addition to connecting customers with the right employees who are incented to fulfill their needs, companies realize other meaningful business benefits from having engaged workers. Employee turnover will be reduced, particularly in high-churn areas such as contact centers. HR costs will drop as companies have to devote less time and capital to recruiting new employees. That will also lead to lower training costs as companies retain longer-tenured, knowledgeable workers.
Nevertheless, the HR-related cost savings that stem from these actions pale in comparison to the impact that a highly engaged employee will have on cross-sell/upsell rates and other favorable business outcomes that result from happy, satisfied customers.

The Missing Link of Social CRM

Customer Strategist Martin Förster: Social CRM Requires a New Marketing Skill: Having a Conversation

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

 

Many companies today are trying to understand Social CRM and integrate it into their marketing activities. The way they do this is by optimizing their existing campaigns for social media, or sometimes by creating wholly new campaigns revolving around the viral character of social media. These companies are present on Facebook, Twitter, YouTube, and MySpace; they send their marketing messages nicely wrapped through all channels, they reach a large audience of fans and followers. Just like they did before Web 2.0.
What is common to most of these companies is that they understand social media as another channel for campaigns. They fail to grasp the totally new character of social media, the one that justifies calling it Social CRM. By including social media in their channel mix, enterprises are giving up traditional outbound one-to-many communication to their customers. Instead, they are inexorably entering into a continuous multidirectional conversation between not just one but many customers and the enterprise that occurs permanently, that is driven by customers, and that takes place irrespective of the enterprise. The enterprise can opt to participate, but the conversation will continue regardless....

The Mechanics of a Robust e-mail Marketing Strategy

Customer Strategists Kurt Neckebrouck and Isabelle Jansen: Building a Sticky Email Marketing Strategy

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

Compared to paper-based customer communications, email marketing is often considered to be a more cost-efficient tool. Still, many marketing leaders continue to struggle with effective approaches for delivering relevant email content to recipients to help boost opt-ins and response rates.
These challenges are further complicated as email - and by association, email marketing - continue to compete with social media for consumers' mindshare. According to MarketingSherpa's 2010 Email Marketing Benchmark Survey, while 81 percent of executives polled say they believe that social media helps to extend the reach of email content to new markets, 71 percent of decision-makers say this ongoing battle for eye-share between email marketing and social media will increase in importance over the coming year.
As the survey results suggest, decision-makers must continually fine-tune their email marketing strategies to help ensure that their message resonates with their intended audience and helps companies to meet their goals. When considering those objectives, decision-makers need to ask themselves the following questions:

Actionable Insight: Engaging Consumers and Suppliers

Sustainable practices: engaging consumers and suppliers -- by Grace Segran, London -- Coca-Cola is one firm that knows very well that its environmental and economic impact extends well beyond its factory gates. This starts with the ingredients it needs for its products to the natural resources required to make the packaging, "extending all the way to the people who buy and consume our drinks and handle the packaging," says CCE Europe's Communications Director, Shanna Wendt who spoke to INSEAD Knowledge on the sidelines of a supply chain conference here recently. Shanna Wend With companies increasingly being held accountable for the environmental and social practices of their supply chain, how then do they go about engaging consumers and suppliers in their supply chain?