Wal-Mart, Scott, Duke. Time to get excited?

I've written and taught a lot about Wal-Mart's missteps in its globalization strategies, looking particularly hard at the situation in Germany, which yielded to a perfect confluence of a Porter Five Forces analysis and my five forces of customer experience analysis. (For more info on the Five Forces of CEM, contact me.)

But Germany wasn't the only market that Wal-Mart was drummed out of. Asia - including Japan - has been hard to the company. But wait -- Germany and Japan, why should they be such a big challenge? They're developed economies with good GDP and a sizeable number of people who want to save money on a range of products.  How on earth could Wal-Mart mess that up?

Nevertheless, clearly Wal-Mart must have a globalization strategy. They need it for the long haul. And the new guy in charge of Wal-Mart, Mike Duke, managed their globalization efforts. His next big foray?

Australia.

Now, this makes some sense, if you look at all the available research on consumer buying styles (which, frankly, Wal-Mart appears not to have done in Japan and Germany). Australia and the US are pretty darn close on their consumer style preferences. And, because such preferences factor heavily in my five forces of CEM, Wal-Mart might seem to be on track.

Except.

One of the things Wal-Mart will have to figure out is how to maintain enough profit in their global operations factoring in global macroeconomic changes bound to be coming down the pike. Currency exchange rates and cost of capital will become a huge part of financial and growth projections and planning, and I believe a huge component of Wal-Mart's risk going into Australia.

And, I have no particular information to indicate how Wal-Mart's brand will be accepted in Australia. One of the challenges I've faced as a global customer management consultant is determining the extent to which global communications affects brand perception. This is a counter-balance to highly localized strategies that focus on local knowledge of a company's value prop. So, for example, the "China" strategy for Wal-Mart would have to be quite different on the east coast as it would be for the interior. Buying styles, consumer perceptions and values, pricing and assortment -- all will vary. And many consumer expectations about a good value prop will be influenced in subtle ways by information they get about companies via the Internet (directly or indirectly).

So, now that Wal-Mart has developed a brand of its own -- and by this, I mean a blend of the brand it intends and the brand as perceived by its publics -- how will Australia process this brand position? Is Australia's consumer base posing another unknown market risk to Wal-Mart?   

I saw a marketing report released on the Internet from an anti-Wal-Mart group, and from what I read, Wal-Mart's market data is so gingerly presented, so heavily filtered by pro-Wal-Mart language, that Mike Duke's first order of business is to get to the truth of the matter. 

Mike Duke has got his work cut out for him. A potentially low-margin play Down Under in a risky economic environment, with potentially huge game-shaping unknowns about how its brand is perceived in Oz ... and elsewhere.

Corporate Social Responsibility - Genuine or Generous?

As a part of my model of customer forces (imagine the Porter Five Forces sweater turned inside-out), I hang corporate social responsibility on the hook of the customer's process of reflecting on a company's values.

The idea is that CSR programs make a statement about a company's values, and that these values can generate an emotional bond with prospects and customers. But the cynical company will develop a CSR program (if they develop one at all) that is just for show. That dog won't hunt. The phrase I heard recently is that CSR should be genuine, not generous. 

For me, that means two things. First, the program should REALLY indicate the company's values, and the company's values should be reinforced internally around a principled CSR program. Second, the program should focus on impact in a nuanced, measurable way. Whereas a company's marketing program should strive for consistency and simplicity in its messaging, its CSR program should respond to the non-commercial needs of the world in a sophisticated way. This is because a customer's expectation of a company's CSR program is set by how the company is performing tasks that a government, or non-profit, would perform them. It's a policy filter, a program filter -- not a marketing filter. 

We're OK with the one-two punch simplicity of Apple's Mac vs PC ads. We won't be OK with Apple simply removing certain chemicals from its products. That's a step in the right direction. But add in their recycling program, you're starting to get the sense that Apple is thinking this through. If Apple were to add additional "green" practices, and to support other "green" initiates even if they don't control them, people would believe in the genuineness of Apple's commitment.

I think a consequence of this analysis is that companies should actually consider tackling complex, hairy problems in their CSR programs. This may fly in the face of compartmentalizing CSR and coming up with simple measures guaranteed to succeed. Even Apple, which I believe is indeed sincere about its green policies, likes to show checklists of things it has accomplished. But the worries that face customers are often complex, multivariate problems. A simple scorecard won't work. And these worries are well-founded.

A beautiful example is the problem of honeybees. They don't just make honey, they pollinate up to a quarter of the world's vegetable, fruit and nut food supply. They make up a critical part of an ecosystem that has sentimental, practical and economic impact. 

They are also probably going to be extinct in 10 years or so, at least in Britain. 

Just as some companies are too big to fail (to use the parlance justifying the current financial bailout program in the US), some insect ecosystems are just too important to fail.

And to fix that sticky problem, who's going to take the lead? Is it a multinational governmental problem? 

Or do global companies have a role to play?

Time for some corporate social responsibility where it really matters, and where we really need it: On the hard, messy, non-linear, hard-to-measure problems. 

You're probably not global. Nor are you domestic. You are semi-global.

Pankaj Ghemawat of IESE has a nice series of videos on the Financial Times web site on globalization strategies. Click here for the first video, and here for the second.

He makes the point in these videos that many companies are really semi-global. In my experience, this is true, for the following reasons:

1. Most companies with a domestic profile are actually dealing with multiple cultures. In the USA, the Latino, African-American, and white populations often have distinct value systems and expectations -- with variations depending on where in the USA you are. 

2. Most companies with a "global" profile are really doing most of their business in just a few countries, and are reluctant to completely innovate their product and service line to be completely compatible with the demands of local markets -- thus making their offerings partially local, partially "global". 

3. Many companies in economically unified areas that are nevertheless diverse in terms of language and culture may have to market across cultures with print, broadcast and cable ads in order to take advantage of their ad spend size -- but run into serious issues when they fail to create ads that speak intelligibly in all the cultures they must address. Not to mention having to deal with some local customs and regulations regarding truth in advertising.

So, taking advantage of one's size, extra resources, range of resources, and so on, can be challenging for a global company -- even more so for a semi-global one whose pockets aren't as deep as huge multinationals, and where the margin for error is therefore smaller. We can't all be Wal-Mart, whose essay into Germany cost them billions of dollars -- a mere drop in their revenue bucket. They tucked tail and left the country. Semi-global companies would find a similar loss disastrous.

What's a company worth?

I was poking around the internet today to get some idea about the distressed asset strategies that JP Morgan is employing regarding WaMu and -- potentially -- Wachovia. I found this fascinating link that looks at the relative merits of the class capital asset pricing model (CAPM). It rains hard on CAPM, and makes some really interesting observations about what market behaviors of stock pricing and purchasing really mean.

Apple Competing on Analytics - and Customer Intimacy

It's been said that companies have a choice. Compete on customer intimacy, product excellence, or operational superiority. Pick one, but it's just too hard to do all three.

But Apple has been doing a great job at operations, with arguably the nimblest supply chain the technology sector, as well as at creating excellent products -- even considering their MobileMe hiccup, which has largely been dealt with. 

As for customer intimacy, the sense of closeness that customers feel for Apple has been much more than Apple's actual leverage of customer data. They've won that warm and fuzzy feeling from top-down branding.

Genius, in iTunes8, changes that. 

Genius analyzes your songs and can make recommendations about playlists, either by showing you a list of compatible songs you already own, or by suggesting additional songs on the iTunes Store. It's fast, it's REALLY good at what it does -- and it leverages customer data to create more perceived value in iTunes.

There are two consequences. First, Apple lovers will continue to love Apple, and barriers to exit will be higher than ever. Genius, after all, does what my beloved Pandora does -- recommend songs similar to what I like. (Microsoft has a Channels tool that does something similar, but I've not tried it.)

The second consequence is bigger. Many of Apple's newest customers are switchers. They have bought iPods, the iPhone, and iMacs, spending billions on a product that seemed far less risky to them now than they might have seemed just a few years ago. But these switchers are not the early adopters -- nor even the early followers. Early adopters and followers behave that way because (for various reasons) their risk appetite is quieter than most. Most people, in fact, rightfully want to know more about product choices before they buy. They want to choose carefully -- and they want to suspend their loyalty to a brand at the slightest hint that the brand sucks.

So, in short, Apple has a lot of new customers that are just waiting for it to fail them, at which point they will (and have been) complaining loudly about how Apple products aren't any better than Microsoft products. Apple products may be great, and their supply chain may be great, but if they're not PERFECT, they will get demerit points from this huge, skeptical market to which the company now sells billions of products.

Genius can help Apple win their hearts and minds. It's powerful, it's fast, it's easy, it's fun. It keeps one's music library popping. And, underneath it all, one gets the sense that Apple knows me, and it cares.

Genius does all this, and it's free with iTunes8. It's a great start. I would look for Apple to do more with analytics over the next 12 months to gain even more customer intimacy. If they're smart, they'll acquire a few companies to accelerate the process, and introduce a few high-profile customer-driven platforms that truly elevate the customer from their current position (at best, worshipping at Steve Jobs' ankles) to an entirely new position. A position to be defined by Apple. 

Customer Analytics and Taking Photos While Blind

This heartwarming story, about blind photographers in Israel as recounted in the CNN video below, has lessons for decision-makers: 

1. If you can't see your subjects (customers), use your other senses.

2. Develop skills you currently don't have.

3. Choose from the results you get by employing people who can see.

4. Make the final decision based on what looks right, and what is important to you (and your business).

The lessons flow from the observation that most companies don't really "see" their customers. They don't have the tools to gather information and create insight about what matters to customers and prospects. Even if they do have the tools, and the insight, final choices about what to do must fit a carefully designed strategy that builds value for the customer and for the company -- defined not as revenues or utility, but as value and values created and exchanged. Revenues ain't enough. A product's usefulness ain't enough.

Business intelligence is hard work. Dashboards require clean data. Actionable data requireproper modeling, extraction, transformation and loading. And the right data are absolutely critical. If you keep measuring the same things each time, you may be missing changes in the competitive or customer landscape. 

Still, just getting started is half the battle. It opens up the right slots in your budgets and alerts your staff that customer data -- and decisions driven by those data -- are now central to operations and market position.

Enjoy the video.

Experiencing Wine

Just got back from a grand tour with my wife of part of Oregon's superb wine country. Thought I'd share some thoughts about wine and experience management.

What is wine? Sure, it's a fermented beverage. But just as sensory transference makes Coca Cola more than just sugar water, multiple components of wine tasting influence a person's experience of this classic drink. 

One of the great things about wine is that it captures just about every marketing hook ever invented by wily strategists. You can get people to love the label, the bottle shape, the sensuality, the location (country-branding is a huge new discipline), the people who make it, the history of the grape, the technology, the food-pairing options ... and with the latter, you bring wine into another marketing category: cuisine. Not to mention travel.

So, what is key to the experience of wine? It depends on what the consumer brings to it. Wine is a classic example of needing to capture the state of mind, value systems, and expertise of the customer in order to properly sell it. As rich as the opportunities are to sell wine, it is a complicated task to identify the right hook for the right customer. 

One hope, in my view, is the social network. Online social networks can develop information about consumers' preferences in related areas: travel, food, friendship, luxury, and so on. Using this information, wine sellers and restaurants can better communicate with customers. 

Who's doing this now? 

No one, as far as I know. 

Gentle people, start your engines.

-

Photo Copyright (c) 2008 by Paul K. Ward. Photo of the author and his wife Angela at the Sokol Blosser Vineyard near Yamhill, Oregon.

Framing, Russia and the US Election

Russia just voted to recognize the independence of two regions of Georgia, South Ossetia and Abkhazia. 

As background, Georgia claims these regions are part of its own territory, although it has also treated the breakaway republics as being de facto independent since the 1990s. The UN and other bodies encourage Georgia to continue dealing with these two regions diplomatically, which seems to acknowledge their status as valid independent negotiating entities. In short, the issue is truly unresolved.

But criticism of Russia's move around the world is muted because the United States led a similar initiative to recognize Kosovo's independence, which was declared on February 18 -- to much controversy, given that this was seen by many as an attempt to shift Kosovo from a traditional Russian alignment to a NATO/US alignment. 

In a way, Russia's move to geld Georgia is a way of punishing Georgia's president Mikheil Saakashvili, and in another way, it's a poke in the eye of the United States, which has been perceived by Russia (probably correctly) as the architect of a restraint policy. With the Russia/EU split in Ukraine, a Western-leaning Georgia and now missiles going into Poland, Russia is feeling as though it has to play some chess moves.  By recognizing the autonomy of Abkhazia and South Ossetia (partly protected by Russian troops as a bulwark against Georgian incursions), Russia has taken advantage of the moral high ground many believe the US (and hence Georgia) ceded with the Kosovo recognition.

The frame in political terms here is "fair is fair." The US is largely hamstrung on the issue. Any outrage would now be seen as hollow, or -- worse -- hypocritical. 

This frame works because the United States needs to present itself to its own citizens as being sincere and plain-dealing. If this issue were not part of a US government initiative to isolate Russia in US public opinion, then Russia's frame would lose a lot of its power. Frankly, the United States over the years has had a free hand in being insincere or obscure in its dealings with other countries. (The United States is not alone in this -- after all, the German word realpolitik has been conspicuously a part of our foreign policy DNA since Henry Kissinger's days.) But when the US needs to convince the American people that it's doing something based on ideals, it needs a believable frame. Russia has exploited the Kosovo declaration for both tactical and strategic purposes, because the United States has chosen a weak frame.

Now, to the US election. 

Have you noticed how, in the last several presidential election cycles, somehow gay marriage has bubbled to the surface immediately prior to the election? Why is this? My own view is that the conservatives in our country believe that gay marriage is a divisive moral issue that helps them preserve their social conservative base, and by carefully managing the state legislative agendas, they can get states to at least bring up the issue -- and ideally to pass pro-gay-marriage laws -- so that it plays in the national press. The frame they want to use: Marriage is a traditional ritual between man and woman, for the purpose of creating a family. The frame that progressives and liberals want to use (but cannot gain traction for): Marriage is a civil right. Conservative political strategists want this issue to come up, particularly in a legislative context, because it puts our very laws "at risk" of being tainted by ... fill in the blanks -- the tactic is fear-mongering at its worst, in my view.

I won't go into my own views on how progressives and liberals should change their strategy. That's for another posting.

What I want to do here is to warn progressives about another frame that's being introduced, and it will bite the Democratics in the rear if they don't start thinking about it. That topic is underage drinking -- right now framed in the press as reducing binge drinking by lowering the drinking age.

Think about how this is going to play out. If Obama supports it, social conservatives will rally to McCain. He might preserve some of his youth vote, but Obama had better be sure how young people really feel about changing the drinking age. If Obama comes out against it, you can bet that conservatives will say that he doesn't trust American youth, and that he's a hypocrite, since he drank and used drugs as a young man.

And you can hardly be called anything worse in America than a hypocrite. (See the Russia story above.)

So, what do I recommend for the Democrats?

Simply this: Nothing is more important for the future of our country than the health and well-being of our youth. We should not lower the drinking age without looking at the overall risks. And we cannot craft the best solution by leaving families out of the conversation. 

This frame has the merits of being based in values: patience, family, collaboration. The story is probably one of the government being a mentor to the real hero (the family). This shifts the government from the role that conservatives might prefer: the gatekeeper or -- even worse -- the villain. 

It will be worth watching to see how this is going to play out in the next few months. Of course, I could be wrong that the drinking age issue is a stalking horse designed to pull the Obama campaign into a lose-lose situation. We'll see!

Blockbuster finally gets a strategy. Uh huh.

Kiosk at BART/Muni Station, Photo from Metropolitan Transportation Commission, mtc.ca.gov. Not representative of Blockbuster's kiosks.

I teach customer experience management. In the context of customer relationship management, CEM includes the usual stuff: identifying your customers, differentiating your offering (which now comprises product, service and experience, chopped up in new ways), interacting with customers (or letting them interact with you in new ways), and customizing your offering (or letting people customize it themselves). You know, IDIC.

Well, I teach people about Blockbuster and Netflix when I teach customer experience management, and I gotta say, it drives the point home. All the things you have to do in modern IDIC are done really well by Netflix, and terribly poorly by Blockbuster. Blockbuster has improved things quite a bit, but they basically affirmed their traditional retail model with their new CEO pick. Their online service, designed to compete with Netflix, is OK, and getting better, but Blockbuster does not have a customer culture. Process improvement in their online offering, and supply chain improvements and store closures in their brick-and-mortar offering, just don't show the passion for the customer that Blockbuster needs to show.

That said, check this out. Reuters is reporting that NCR and Blockbuster have joined forces to create DVD vending kiosks. The idea may be the beginning of a new strategy.

And a flawed one. 

Think of it this way: They are trying to put lots of kiosks in convenient places so people can get a movie NOW, no lines, no waiting for something to be mailed to them. The value proposition is CONVENIENCE. And it might work to move some DVDs.

But will it work to restore Blockbuster's brand? Will customers become loyal to Blockbuster through attitude and behavior? That's what wins total return to shareholders.

Think how this is going to play out. The kiosks go in your drug store, your grocery store, maybe your gym. In a corner. With a skirt of trash and obstructed by chairs or baskets or candy bar racks. 

Kiosk at BART/Muni Station, Photo from iekiosk.com. This is an NCR kiosk that may not be representative of Blockbuster's kiosks.

Not a lot of brand building going on. Not a lot of customer data being grabbed and stored and used to serve the customer better next time (although I suppose Blockbuster may have something up their sleeves here, exploiting online channels cross referencing your credit card with your email address). No, it's just Blockbuster leveraging what they know how to do better than Netflix: ship things forward and store them. 

Where's the customer? Where's the exerience? Where's the increasingly intelligent level of service? 

Here's what I see. Netflix will continue to keep medium- to high-use customers, those folks who feel as though they want to have more than some low threshold of DVDs in their queue at all times. 

And Blockbuster will get the rest -- people who don't want to commit to a Netflix subscription, so they can just rent the occasional DVD. 

These are, behaviorally, the worst customers.

Go for it, Blockbuster!

Apple's Introduction to the Wild West

Apple has been a beautiful company. People think of it as a superb marketer. It is. It is also a super design company. Apple, finally, is also a world-class logistics company. 

But now, with the iPhone AppStore, they've thrown themselves into new territory. Application developers get to sell their products through the AppStore, with Apple's approval, which helps Apple build a huge repository of software (read: complex code with a multitude of risks) without having to write it all themselves.

Note the paranthetical comment about multitude of risks. 

If Apple approves something for the store, great. Unless it doesn't work. Who gets the heat? The app developer. Some, sure. But so does Apple. And suppose it does work -- but it creates a functional issue for an Apple partner such as AT&T (for example, the "modem" software that allows an iPhone user to set up the phone as a local hotspot for WiFi access). Does the app developer get any blame? None. But Apple does.

And so Apple yanks down software it had previously approved.

And annoys an entirely new community -- app developers. Who blog. And blog. And complain to the tech media -- who blog, and investigate, and so on.

Is there a way around this? Yes. 

1. Apple slows down its approval process and has applications reviewed by a panel of stakeholders. This will probably catch the majority of issues, and the internal nature of the process allows Apple to capture business/decision rules and apply them effectively in the future, whether in EULAs or developer agreements, or in their own processes and R&D.

2. Leave things the way they are and jump in the middle of the conversation. In short, treat the Wild West of the AppStore as an opportunity to influence and balance the conversation, since it cannot be directly managed. 

The first option is more in line with Apple's DNA. The second one is more in line with the open nature of the new economy.

My own advice to Apple? (As if they'd ask.) 

Ride the horse headlong into the Wild Wild West (cue Will Smith). You can't avoid it, and while you have good will with the great iPhone, you can afford to stumble a few times, as long as you wind up in the conversation, publicly, with developers and customers. When you rely on them for your economic strength and good reputation, they don't want to be at arm's length. App developers are hungry for information about what Apple wants to and CAN sell. Customers are hungry for apps, and don't want to be confused by having them constantly yanked on and off the virtual shelf. If that confusion is inevitable -- and I think it is -- then Apple has to figure out how to be more public about the process it uses to approve or disapprove these apps.

What's up with trade agreements? Fear and pride, that's what.

So I was catching up on my Asia news while in Singapore recently, to learn that the ASEAN countries are essentially on notice that they'd better put-up-or-shut-up in creating a more integrated regional trading force. (ASEAN is sort of NAFTA East, but excludes China and India, although they are party to regional discussions with ASEAN.) I've been tracking this for a long time because I predict the Asian countries in ASEAN (and India and China, but especially the fast-rising Malaysia, Singapore, Thailand and Viet Nam) are in a position to both grow and be more powerful on the world political stage via a combination of economic emergence and tighter integration. With all the hand-wringing in the West about the impact of China as an economic superpower, I think China's got nothing on what can happen with ASEAN. After all, the structural and resource disparities among these countries create an ideal opportunity for partnership. Outside of India and China, ASEAN countries have labor, transportation, logistics and targeted industrial support well in hand -- and it's only going to get better.

And now, the WTO talks have sputtered (almost) to a close. The US Trade Representative, a very impressive woman named Susan Schwab, won't quite admit the current round is dead, but as of last Friday, the agricultural subsidy issues seem to have put the trade talks on life support.

So, with ASEAN, what's up? I think the security issues that are being blamed for sidetracking the talks are really a sideshow, as important as they are in the context of the Burma international aid fiasco. India and China have already begun military cooperation (as of last year), but given their very real border disputes, I believe the ASEAN cooperation framework is going to be less interesting to them than occasional bilateral moves between them. The ASEAN countries clearly have a window of opportunity. They need each other more than they would benefit from going it alone in the region. So I'm not really sure what's holding them up -- unless the newly shiny Vietnam, Thailand and now Cambodia are just not as interested in cooperation. Growth can make you heady.

And the farm subsidies that are confounding the WTO talks? It's fear. There are too many vested interests on all sides within the agribusiness arena to let this one be easily resolved. Plus, food supplies are a matter of national security (and, in France, food quality is a matter of national pride). It gets tricky pretty fast. 

I think the argument that the US wants open, free trade of food supplies (except when we don't) doesn't frame the US point-of-view accurately. For many businesses in the US, it's about creating new markets all around the world, in part by dismantling or damaging their domestic markets. While some might view this is economic "restructuring" in the name of free trade, I don't see it that way. Creative destruction can be well and good, but for me the social and national identity issues in a nation's food production are crucial. 

And I admit that's because I like my Croque Madames made with local French farm eggs, EU ham, Poilane bread, and Gruyere. It's not just France's identity at stake. It's my own. 

Think of it this way: Freer trade makes the source and type of food you eat far less "local". While it has been argued (even in the liberal online mag Salon.com, whose journalism I love) that local produce is not necessarily "green" (burns more fossil fuels per unit than mass distributed food), local produce has something that agribusiness folks can't every package. 

Meaning.

So, what's up with the trade agreements? In ASEAN, country pride. In the WTO -- global corporate pride. And a bit of fear that globalized food supplies will stamp out a lot of valuable things about place, sovereignty and security.

UPDATE: CNN covers this story today (Wednesday) with a nice summary of the WTO breakdown. And Forbes has a brief article as well that summarizes the issues, the winners/losers, and the hope for continuation of this seven-year-old Doha round.

Not all customers are alike - and some aren't even customers at all ...

Boy, I can't wait to share a blistering blog scandal with you. First, some background.

I was chatting with Jim Sterne, an eminent colleague from Canada who is also a customer strategist, while we were in Bogota at a recent CRM conference we were keynoting. I mentioned that I had been developing the five forces of customer experience management (think Porter's Five Forces, but through the looking glass ... ) that has as a pillar that a company's value is defined in part by networks of opinion. This is clear from detailed stock price research in financial services when a firm engages in fraud. The loss in total return to shareholders often far exceeds the actual fraud. 

You can also look at what happened when Egg, the online UK bank, was recently acquired by Citigroup. Citigroup promptly "fired" Egg's least profitable customers, sending them a letter indicating that Citigroup viewed them as a "risk". Big hullaballoo in the press, followed by threats by the UK government to look into it -- followed by the UK government actually looking into it. In the world of enterprise risk management, that means you've got reputation risks compounded by regulatory risks. Bad move, Citigroup. Forget the money you probably "saved" by firing those customers.

The point is, and Jim Sterne bore me out on this based on social network research he's done, your customers aren't all worth the same to you. Some Egg customers might not have been profitable, but because many of those actually paid their bills on time, they were rightly annoyed to be called "risky". Once you get to negative word of mouth, your "net promoter score" (Google(tm) that) drops like a cannon ball in jello. Splat. 

And, other folks who are not even your customers can pile onto this. This is negative network effect in action. 

Take the example of this thread on the very solid food blog Alosha's Kitchen. She wanted to share a potato salad recipe she had borrowed from a friend's site -- with some modifications of her own. She knew that the recipe she was borrowing had appeared in some form in Cook's Country (a publication of America's Test Kitchen, and Cook's Illustrated, the latter which I enjoy very much).

So she made her mods, gave Cook's Country due credit -- and promptly got called on the carpet by a public relations rep at ATK. You can read the entire exchange at the link.

The interesting thing is that this one incident has now generated literally HUNDREDS of responses just on Alosha's Kitchen blog. I suspect it will be echoed tens time over by the time it's all done, generating a signal in the blogosphere a thousand times bigger than ATK intended.

And, the question arises: What's the cost to ATK? First, you have to look at the brand values that are expressed in the company's behavior. Actions speak louder than words. Prior to this exchange, for many bloggers, ATK may have represented a quality assurance team, a bunch of heroic, practical cooks dedicated to helping us all avoid a bad meal, and to even ensure a very good meal when it really counts. Now that this exchange has been publicized, for many people the ATK brand values might be defined differently. Words used include "arrogant". 

Secondly, you have to look at lost future sales to current customers (discounted to today using the time value of money). Are we talking hundreds of dollars, or thousands? 

Thirdly, you have to look at the effect of the net promoter score, which is based in part on Reichheld's empirical (and generally accepted) observation that people who don't like your company will talk you down to other people. (New studies show that the negative word of mouth effect varies by sector and competitive environment, but the effect is still there). So, what is the loss of sales to customers you MIGHT have had? Some might argue you cannot know, but in fact, you can do a nice estimate based on Reichheld's work and multiplying by the discounted future value of the estimated number of lost future customers.

I'm guessing the cost of this exchange will be in the tens of thousands of dollars of lost future revenue. 

Now, when I teach the five forces of customer experience management, one of the points I make is that these forces make it REQUIRED that companies develop new core competencies, and chief among them:

Monitoring and dealing with bloggers in respectful ways. In fact, if you can, leverage them.

So, what would you recommend to ATK at this point? 

It's not all about the iPhone -- or is it?

Saw this on the NYTimes blog section today. 

V.C. Advice to Entrepreneurs: It’s Not All About the iPhone
By CLAIRE CAIN MILLER
Though almost every discussion at the MobileBeat conference in Sunnyvale, Calif., on Thursday centered around the iPhone, venture capitalists told mobile entrepreneurs to broaden their focus and build applications for all phones. Still, all anyone wanted to talk about was the Apple App Store, from which users have downloaded 30 million applications for the iPhone this month.

Startups should “intelligently hedge their bets across multiple platforms,” advised Richard Wong of Accel Partners. His firm has invested in mobile games and application site GetJar, “the store for the other 3 billion phones that aren’t iPhones,” as Mr. Wong put it.

Rick Segal of Blackberry Partners Fund and JLA Ventures reminded developers that the iPhone only accounts for a tiny share of the worldwide market. In India, for example, Nokia has 70 percent market share. “You must think multi-platform,” he said.

Some investors insisted that multiple mobile platforms–whether Apple’s, Google’s, Research in Motion’s or others–will thrive. Matt Murphy, head of Kleiner Perkins Caufield & Byers’ $100 million iFund, said most entrepreneurs who pitch him have iPhone applications, but that the platform war “is not a winner-take-all game.”

David Sokolic of Battery Ventures disagrees. He predicts a shakeout akin to the PC market and Microsoft’s Windows, with a clear leader emerging...

Two learning points here, I think.

1. It IS all about the iPhone for mobile entrepreneurs, whose main goal is to take invested capital and gain quick cash flows. The iPhone is not the product: the real product is the Apple platform, which is about as direct-to-consumer as you can get, with the added bonus of being a trusted channel. Apple's true insight with the iPod and the iPhone is that the PLATFORM is the offer, and the benefit of that offer is a simple, trusted source for digital content. By giving that platform so easily to entrepreneurs, Apple theoretically can build robust product ecosystem very quickly, while giving software developers the ability to leverage what they presumably do well: build and sell software. Software entrepreneurs are usually terrible at marketing. 

Contrast the Apple "platform" with what you have to go through to get Nokia's attention in India. I think the VC's are looking at this wrong. The risk is in getting to early cash flow, not in diversifying the customer base at a huge up-front cost for HR, multi-platform technical support, and high cost of marketing. 

2. Will a clear leader emerge? One thing that strategists almost uniformly ignore is the power of the retail channel to keep a leader from emerging. So long as both hardware and software are sold through retail, you'll have multiple players. Retailers just have too much incentive to keep suppliers vying for the value of their in-person sales channel to give it over to one provider. It gives the retailer buying power, and it gives the OEM a channel they can rely on -- even if there's price pressure. 

So, to answer the question, will a clear leader emerge, we have to look at the question, will people start buying phones and mobile software primarily through retail, or will they start buying the phones and software primarily via the Internet? Because on the Internet, clear leaders do emerge.

Want to lay bets on the future of mobile phone retail? I know how I'm placing my own bet.

UPDATE: Very interesting and intelligent forum/blog discussion on the topic of the iPhone app ecosystem vs the Facebook ecosystem. I have my own views, but the interesting thing here is that you can see the POV of investors, developers and customers. 

Framing, Obama, Jesse

And while we're on framing:

The Obama/Jesse controversy is a perfect example of "framing" with regards to racism in America.

http://www.baltimoresun.com/news/local/bal-te.md.jackson11jul11,0,3451704.story

The civil rights frame is "racial justice". Obama's is something to do with "beyond race." Some middle-of-the-road and right-wing listeners don't want "racial justice" to incur a penalty on them for things they didn't do ("I'm not a racist, why should my government have to use my tax money to create racial justice?") They want everyone to have a chance to make it in America, black or white, and to take responsibility for their own success or failure. That's the "personal responsibility" frame.

So, the argument that Jesse Jackson is making is essentially this: By Obama's adoption of the "personal responsibility" frame, he is rejecting the social/racial justice frame that created (and creates for many today) meaning with regards to civil rights and justice.

The communications lesson is that choosing a frame right can help you appeal to specific, desired audiences -- and at the same time keep you from appealing to other audiences, depending on the amount of bias for or against certain frames. I expect Obama knows what he's doing here. The risk for him is not capturing the middle. He knows he's got the left. So the personal responsibility frame can work for him from the middle to the right. As analysts have said, Jesse's comments probably make white middle-class people comfortable.

Framing, frames and globalization

We think and remember in stories, metaphors and other "non-literal" structures. 

This is why it's so hard to get people to tell us how they really feel and think using surveys. We can get close, we can use tricks -- and we can backfill with qualitative work -- but in the end, we'll get closer to understanding customers and how they perceive us by revealing the stories and metaphors they use to perceive our offerings.

Those frames vary across cultures. 

Challenge to my readers: Why are the Apple Mac vs PC ads funny and memorable in the US? Why are they more controversial, and perhaps less effective, in Japan? To what extent is the comparison ad less powerful in Japan because of they way Japan frames its key stories?

 

Benefits of strong global leadership talent

I got my executive MBA from TRIUM, which bills itself as the first truly authentic global MBA for executives. The small program (a cohort has ranged in size from 35 to more than 60) has been around since 2003 and over those years has slowly increased its reputation on the street until it burst to #4 (Financial Times) the first year it was ranked, only to better that ranking in its second year, becoming #2 globally.

That's nice and all. But the point for me was to actually become better prepared for what I saw as a critical next step in my career: to better fill the gap between traditional strategy and global business strategy. Since getting my TRIUM degree I've been working with the program as its alumni chair to provide services to alumni while providing feedback to TRIUM based on what students and alumni say to me and the committee I run.

One of those big topics: The curriculum. There's no doubt that the three schools which established TRIUM have among the best academic reputations in the world. And there's no doubt that Matt Mulford, who has long been leading the struggle for an integrated curriculum in cutting-edge areas, is a superior international player in global curricular development. 

But let's remind ourselves: What's the goal of a program such as TRIUM's, or Wharton's, or Duke's Fuqua School? I think it's about creating an awareness among students (along with key skills) that a global leader differs from a domestic leader. The issues are different in economics, politics, human resources, strategy and core values. 

I've been thinking about this a lot lately as I wind down my two-year stint with TRIUM's alumni group, and lo, behold, an article appeared in the Insights newsletter from the Association for International Business (AIB - I'm a member primarily because of its top-notch journal).

Joyce Osland (Lucas Professor of Global Leadership, San Jose State University, USA), has written a breezy overview of global leadership frameworks and issues. She reports that over 60 competencies have been identified in various studies of what makes a global leader truly great. She also describes another research path that focuses on tasks and effectiveness. Presumably, defining what you should do effectively to succeed gives you a clearer, more measurable baseline than softer competencies -- but nevertheless you can better infer the desired competencies if you know what you, as a leader, need to produce at the end of the day. 

A surprising theme that emerges from Dr. Osland's article, however, is that soft skills indeed dominate the profile of an effective global leader. "In addition to the high-level problem solving and strategic thinking that one would expect in such a population, their cues and strategies evidence well-developed schemas for boundary spanning and stakeholder management, reading cultural and emotional cues, and seeking clarity." 

The six core competency categories Dr. Osland's own research has identified include cross-cultural relationship skills. Another study identified personal transformation, self-awareness, inquisitiveness, empathy, self-regulation, social networking -- in short, an entire set of skills and processes requiring maturity and emotional intelligence.

This doesn't surprise me. A lot of my work in strategy and implementation is immersed in people issues: What's the value proposition for these cultures? What's the values frame in which customers will assess a brand? What kinds of employees are right for implementing a CRM system? Is leadership behind the new customer strategy? It might seem that my work is about customer relationship management in technical and marketing terms, but at the end of the day, global CRM leadership demands global leadership -- fundamentally different skills than traditional technical and marketing skills. And it's not just yours truly that has to execute well using these skills -- it's my clients, too. 

So, I'm trying to figure out how to squeeze out some that TRIUM knowledge into my clients' C-suite. 

Not because it's about TRIUM, but because there's so much at stake with getting global leadership right. I think TRIUM exists precisely because companies are desperate to see what's around the corner. Wal-Mart got booted out of Germany at a cost of a billion dollars. Even for the number one retailer in the world, that's more than a few bits of silver.

Multinational corporations with the ability to develop global leadership internally do better (Stroh & Caliguiri, 1998). Individuals with global leadership skills create global competitive advantage for their companies. "Businesses have reported an inadequate number of global leaders," reports Dr. Osland.

My part in all this is to get my clients focused on what is really happening in various global markets. It makes my work easier if they know why I ask the questions I do, why I insist on the data I do, and why I recommend the responses I do. It's easy to want to do in Europe what you've done in the US, or to do in China what you've done in Europe. But it just doesn't translate. Do you think Wal-Mart was thinking of selling in China when it came up with its everyday low price brand promise? If they were, then they simply chose the wrong positioning for their company, a major blunder. Were they aware of Germany's culture, laws and commodity retail ecosystem when they developed their everyday low price brand promise? Did they realize that Germans actually seek variety more than they seek lowest cost? 

I'm not singling out Wal-Mart. I just use them as an example of how every decision, including fundamental position, has global strategic consequences. 

Feeding vegetarians to cattle -- social responsibility?

I'm so way behind on updating my blogs it's crazy, but work has been at a white-hot temperature lately, starting with prep and follow-up for the Bogota CRM/CEM summit, and client work, and my talk on loyalty to the American Strategic Management Institute. 

So, I'm doing a little work for a client on the issue of corporate social responsibility, and in my work I run across this link that has a deliciously funny error in text describing a new hot dog product.

Vienna Beef has entered the natural food arena with its All Natural Franks. Made from premium, vegetarian-fed cattle, the naturally cured hot dogs are formulated according to the Chicago manufacturer's century-old recipe, and contain no artificial flavors and colors, as well as no antibiotics or synthetic hormones. According to company president Howard Eirinberg ...

and so on.

So, in case you missed it, it appears that Vienna Beef's All Natural Franks are made from cattle whose main feed is vegetarians. It seems a sweet revenge.

Bogota, home of our upcoming CRM/CEM Summit

Rafael Rodriguez, director of Focused Management in Colombia, is a sharp management consultant and a leader in the country on organizational development and CRM. He also lectures and does executive training, which is how I met him several years ago, when he and I were doing that in Shanghai together. I had the great privilege of sitting in on a half-day session he did on CRM and the balanced scorecard.

In fact, it was Rafael's talk that got me thinking about the long list of management frameworks that have been paraded out by gurus, consultants and academics. Which really work? (Check out the book "What Really Works," one of the best responses to the question, and a solid methodology that I prefer over many other more famous ones.) My own pursuit of the answer has focused on redefining the question like this:

What Really Works = What Activities Generate Results that Consistently Attract and Retain Profitable Relationships with People and Businesses?

Notice that the results of these activities are not necessarily products or services. The only operant attribute of the whole business of doing good business lies in the nature of processes. I can hear many finance folks out there saying that shareholder value can be achieved through things like currency swaps and futures trading and so on. While the wealth is real, and I don't begrudge my rich friends in financial markets their moolah, gotta say, not interested. I'm interested more in the human side. What can we do to attract and retain customers?

Zaltman's ZMET method provides a clue. In "How Customers Think", he nails it when he says that CRM strategies need to figure out how to get people to remember your company, and to tell stories about it -- and hopefully great stories. So, these strategies should focus on what creates positive memories.

If that sounds like soft, social science stuff, be warned: The best experience management strategies involve some of the most advanced mathematics available. And they require some of the most advanced approaches to HR training, innovative qualitative intake, and ultra-disciplined operational measurement and improvement.

In any event, Rafael Rodriguez, my friend and colleague in Bogota, was a key inspiration for getting me to reassess the merits of many common management frameworks.

Rafael, along with conference organizer Practica, has put together a great roster of speakers and trainers for their upcoming summit on CRM and customer experience management, and I was thrilled to be asked to be part of it. (Here's a link to the online promotional page for the conference.)

The great news is that several of my TRIUM global executive MBA colleagues are in Bogota. One of them, Alfredo, is on the TRIUM Alumni Steering Committee (TASC) with me, and as the date approached for my visit, he and another TRIUM colleague, Leopoldo ("Polo") have worked to set up a cocktail party at the famed, swanky Gun Club for TRIUM alumni, as well as for alumni of TRIUM's sister schools, the London School of Economics, the Hautes Etudes Commerciales, and NYU-Stern. These three schools put together TRIUM, and have found the accredited degree program to be a big hit (we were ranked the #2 global executive MBA program last year by the Financial Times, boast, boast). My hat is off especially to Polo, who has worked especially diligently with the alumni contacts for the three sister schools. I am looking forward to a great cocktail party, and to meeting some of the top business leaders on Colombia.

Rafael, gentleman that he is, also has agreed to be one of the sponsors, a fantastic gesture.

So, today, I'm cleaning and packing, rehearsing my custom presentation I did just for Rafael (on my model of the Five Forces of Customer Experience Management), and -- best of all -- waiting in anticipation of Angela's special dinner for me. Tonight, it's coq au vin. She has a great technique for this dish, and it's one of my favorites. (If you want to see her cooking in action, you MUST check out her food blog here.)

I think my next blog posting will be pursuant to a request I heard from my Dubai CEM delegates, on cross-cultural issues in CRM. I've got a lot of stuff to say on that. And it sounds like the problem of "global CRM" that shapes this blog is truly a management challenge, everywhere I go. That's good for me! :) Luckily, there are indeed some best practices, a lot of research, and plenty of failures for managers to study carefully. Or else!

Dubai is done, time to fly home

I had a terrific time with the delegates at the most recent GCCRM customer experience management training, which I did with fellow partners from Shanghai and Dubai (via Ireland). The folks in the room were bright, senior execs charged with either CRM or CEM responsibilities at their companies, confirming the trend I noted in London earlier this year that "experience management" is increasingly part of the title of senior managers. In fact, I'm seeing it more often in titles that I've seen CRM in titles.



This may be a sign that companies appreciate the strategic importance of CEM, while simultaneously demonstrating that their faith in CRM as a strategic initiative may be flagging. That's a shame, because CRM is indeed strategically helpful (except in rare instances where it's only a platform for sales efficiency).

I was particularly struck by the diversity of the companies. We had banking, oil, grocery retail, hospitality ... and by and large the evaluations were really positive, for which I am grateful.

I'll post a picture up here when I get a copy from Alice Tse, the coordinator, who as usual did a tremendous job with the event.

Now, I'm off to dinner, and then I hop on a plane back to DC sometime very close to dawn. I haven't slept well the last couple of nights because of jet lag. Now that I'm heading back, I can feel the double-whammy jet lag already!

First, Dubai, next Colombia

I'm in Dubai, getting ready to teach another round of the CEM Certification course that I've put together with my GCCRM global partners (see the link on the right). We've got folks from automotive, pharma, banking, hospitality -- it's going to be great, and a terrific opportunity to do cross-cultural strategizing with the people here in attendance.

We're staying at the Crowne Plaza Dubai, which is a popular stop for the local government folks every Thursday, and which sports Irish, Italian and Polynesian food. There's even a McDonalds on the first floor. (You can bet I'm photographing their merchandising on a break. I took a bunch of pics of Burger King when I was in Montreal -- that's worth a couple of blog postings by itself!) My colleague Sampson does a touchpoint/brand value assessment of McDonalds and Burger King in the course. It's fascinating.

Check out the May 20-21 lineup for a customer experience global summit here. We've got a terrific front-line team! And I've put together a private blog for all attendees. We hope to have over 100 in attendance, which should make for an invigorating session, and a blog with some staying power. (You need a high number of blog readers to ensure sustainability. The number varies with the blog's focus and the level of topical concern of the audience, so you can't generalize. If we get between 20 and 40 registered bloggers, we'll be good.)

Google + Salesforce = Microsoft + Yahoo?

The buzz about salesforce.com's integration of Google apps into its platform has gotten people thinking about the value of a potential merger. 

Google thinks big. Salesforce thinks big. Both companies have cultures imbued with the concept of "network returns" and "wisdom of crowds". (Google leverages it in different ways, largely through analytics. Salesforce leverages it in their application programming interface and code exchange architecture.)

My first thought was that Google's brand offer is broader than sf.com's and so the Google brand wouldn't be made "bigger" by such a merger. Microsoft needs a company like Yahoo. Yahoo definitely needs a company like Microsoft. The complementarity in culture and market is really strong for them, and makes both brands bigger.

The key rationale I could see for the Google/sf merger: Google might feel it could use some of sf.com's software/platform. If Google feels it can win 18 months of development time by not reproducing what sf.com already does, then the merger might in fact help Google in the broader business application market. Certainly I think Google would be better off throwing programming resources to improve/use an existing platform such as sf.com's, than building another one themselves. 

So, this may not be an issue of brand-building. If Google and sf.com get together, it would be more about winning time-to-market as Google goes after the broader business market. They might want a piece of software-as-a-service CRM (sf.com's sweet spot), but that may just be secondary.

Which begs the question: If they merge -- as opposed to being merely tightly integrated partners -- can the salesforce.com brand flourish? What do they get from such a merger? I gotta say, they're doing OK on the web app platform side. Growth is good. Brand is strong.

About the ONLY rationales I could come up with: mobile computing, and global market strengthening. 

Which leads us, inevitably, to China and India. And to Shirley Young, who's on the sf.com board. Her experience in Asia-Pacific is outstanding. Her Fortune 500 experience is strong. She's also on the board of TeleTech Holdings, a customer management company with strong business process outsourcing revenues. The question I'd want to explore: Is she, like so many others recently, in the conversation about China becoming a stronger target country for sales, as opposed to merely an outsourcing market? Shirley's profile in China-USA cultural relations is strong. She worked on GM's strategy in China (a hybrid of labor arbitrage and target market strategies). 

I can't help but think that sf.com wants half a billion new seat licenses. 

In Montreal

I'm inside yet another hotel conference area in a fantastic city. But of course so far all I've seen is the hotel, which looks just like every other hotel in North America. So, Montreal will have to wait until I get through my part (although I may skip out to dinner in old Montreal with my client contact tonight).

My client, a service agency of the Canadian government is doing a three day session on CRM and I'm contributing to the CRM strategy training on Day 2. Today is Day 1 and I'm listening in (both in French and in English) on the plans, vision and challenges facing the agency. A stellar group of people, good leadership skills, some systems in place (especially in acquisitions), but still a need to define and execute on key performance indicators, especially client satisfaction.

More of an update later ...

UPDATE: The training day went great, especially in the morning session. The afternoon session's time probably could have been better spent just interacting with each other about applying the morning content, and then a group nap. This has been an intense few days for these folks (and for me). 

And the prize goes to ...

I'm heading off to Montreal to deliver a customer strategy training with the Canadian government tomorrow, but I wanted to give a shout out tonight, very briefly, to Sampson Lee, a dear friend and colleague who heads up GCCRM (http://www.gccrm.com). Sampson (pictured on the far left, above) has again put together a tremendous program in Shanghai on customer management. I was privileged to be a trainer to a solid group of marketing professionals at the InterContinental Pudong (which provided me excellent support as well for a cocktail party I put together for TRIUM, HEC-Paris, NYU-Stern and the London School of Economics alumni).

Sampson has the largest portal in China dedicated to customer management issues, and consults to top Chinese companies. His partners are consultants from around the world, and his activities increasingly are global in scope, with trainings being held around the world, and comprehensive customer experience studies being executed across many cultures and continents.

But with all this activity, Sampson, along with his business partner Alice Tse, still manages to put together an annual awards ceremony to global companies best representing leading customer management strategies and cultures. And, he makes a donation to Operation Hope, a child-focused charity.



Here are some pics, the one above is from 2004, when I participated in a huge awards ceremony in Shanghai, giving an award to China Merchant Bank. The first one in the posting is from just a few days ago, again in Shanghai, where Dialog Telekom, the leading telecom in Sri Lanka walked away with many awards for their incredible customer-focused solutions, service and support. (Hello to Ayomal and Sandra!)

BIRGO Davidson!

A key reason to select a particular business partner is to win some unique advantage: share in their pipeline, build on their expertise, innovate your offering. But for some kinds of "partners", the real advantage is reinforcing your brand. Nike and Apple are these kinds of partners. They are different sectors (apparel and electronics), but they own a very similar kind of space in our brains. (BMW and Apple also are partners, for the same reasons.) This proximity of brand location strengthens each brand. Often these kinds of partners are called "constellation partners".

I've been thinking about the Davidson College Cinderella story in their run-up to the NCAA Final Four, which they executed to perfection until the final seconds of a game against Kansas. Just getting to the Elite Eight was great, though, for a school of 1700, of which half are women. All the students are incredibly bright and well-rounded. I know -- I went to Davidson and magically got accepted (they never noticed that I was only pretending to be as wonderful as the other kids ... ).

Davidson was a demanding institution, but with its Honor Code and eating house system, it offered an ethical and social system that reinforced its humanities-oriented curriculum perfectly.

I never followed its sports. Until this season.

Now, I feel -- really, honestly feel -- even more proud of the school, if that were even possible. NCAA tourneys are dominated by big schools, with big players, who are segregated from the main student body, held to different standards academically, and who bring the schools untold amounts of money in various ways. Davidson: small program, smaller players, and they are expected to do their homework and maintain their GPA. And, from all reports, the Davidson Wildcats team is filled with smart, capable students who do math and econ as well as they dribble.

I mention all this because a key part of our experience of brands is whether we are proud to be associated with them, and passionate about talking them up. If they are great brands, or great companies, we bask in their glow. In fact, BIRG (basking in reflected glory), or BIRGO as I prefer it (basking in the reflected glory of others), is a term of art in marketing and branding circles. It describes the phenomenon of appropriating a brand to be part of one's own identity, when that brand is loved or respected. A classic study showed that college students, after their teams lost, would describe the team using the word "they", but when the teams won, would describe the team as "we". It's unconscious. But it's real.

So, in the midst of the Davidson NCAA magic, I found myself thinking that we did well. In reality, I had nothing to do with it.

Let me bask a bit longer, though. Please. I'll return to reality soon enough. In the meantime, you can Google "BIRG" or "CORF".

Back from Singapore

I spent three days doing a training in Shanghai (along with an international Customer Management awards program), then went to Singapore to teach a CEM and new customer management models with UNI Strategic, who did a nice job of putting together the sessions.

I had a great group, I think a perfect fit for the seminar: experienced, facing challenges, and looking for organized ways to improve their customer engagement.

As I was flying back, I finally had a moment to pull the plastic bag off my latest issue of Harvard Business Review, and there was a perfect article on customer management issues in service companies. It goes to the heart of business model trade-offs that define/support the brand, and therefore the profit model, that companies must choose.

One point made in the article is that services companies -- and they include Wal-Mart as an example -- have to make choices about what they will excel at, and what they will not emphasize. Again, this is a theme we covered. But recall our Wal-Mart in Germany case study, and how it showed that Wal-Mart's traditional strengths either didn't work for them, or were undermined by a poor customer experience design, or both. The question I pose is this: When you are designing a customer experience strategy, to what extent must you build in globalization? Can you create a "branded experience model" that works globally, or must you vary the model depending on the local conditions (hierarchy of values, etc.)? If you vary it locally, to what extent do such variations undermine your brand?

Got some examples? How is Carrefour doing it? Tesco? Apple? Procter & Gamble?

Limits to the Voice of the Customer?

Apple doesn't do focus groups. Here's an article that purports to explain the reason.

The reasons that the article's explanation rings hollow:

1. "Apple doesn't do focus groups." Does this mean they don't care about the customer?

Apple starts its innovation process with the question "What do we hate?". This implies an opportunity for the market to love what Apple makes. But for Apple, it isn't just about getting rid of things people hate. it's about making people LOVE what Apple makes.

How does Apple know that people will love what they make? They've built in a culture that looks at the world as their customers do. Wisdom of crowds (within Apple) has replaced the traditional focus group. It works because of Apple's fanatical devotion to making outrageously great products based on putting together two basic pieces of information: Where's the opportunity to create a major impact for customers in their interactions with computers; and what has Apple got that can leverage that opportunity. It's not just about their intellectual property (although they leverage their OS and frameworks across iPhone, iPod and the Mac now). It's about their core competencies in product design, development, secrecy, operational and supply chain excellence -- and their ability to focus.

2. Employees are obsessed.

Are they obsessed with the "product", or with something beyond the product? I would argue they want the product, in part and in toto, to generate a sense of outrageous delight -- in the customer. Which means that the obsession is really about creating customer delight. Here, it's not just a technology product, it's something more HUMAN that Apple is creating. It's art. The reason I don't believe that employees at Apple are obsessed about making great products is that the people at Microsoft probably feel they're equally obsessed. The difference has to be in Apple's culture of framing product excellence within this idea of delight.

3. They cull products.

Perceived value is a shifting measure. Does Apple measure it? I don't know. But they do know that the efficient organization releases the resources it had been spending on an OLD value offering in place of a new one. It's Darwinian. And you can't do it willy-nilly -- why jettison products that have a lot of life in them? Apple must at some point do a calculation about when they have to start the next round of innovation -- and in what direction -- based on balancing the value of keeping a product and tossing it aside. It's zen to let go of things. It's good business, too. But how do you know when? What do you optimize? Again, it goes back to Apple's culture. What decision will let them drive the one key measure that is the spine of their culture?

What will make people deliriously happy?

Sure, focus groups aren't always the best way to innovate. Steve Jobs has said that you can't ask customers what they want when what they want hasn't even appeared around the corner yet. So, there are limits to gathering the "voice of the customer". But Apple, despite it's claim to be a product company, is really a customer delight company. Good thing. It's the customers who have generated your cash reserves and your high market cap to book value.

Broken Egg

Broken Egg
Originally uploaded by pictor ignotus

In honor of Citibank's acquisition of Egg.

Approprability and experience framing

A while ago I posted a Naturally 7 performance captured on the Paris metro. It makes your neck tingle -- and it's not just the performance, it's the audience's increasing involvement in it.

Contrast that with this performance, by young violin virtuoso Joshua Bell, playing in the Washington DC metro system.



What's the difference? Why don't people respond to Bell as they did to Naturally 7? Is it the music? Or something else? HINT: Appropriability and experience framing is the title of this posting.

Appropriability: This is a term often used in multinational business strategy, and in innovation discussions. But the key customer-centered way of defining appropriability is simple. Do you offer a product or service that is both different enough to entice the prospect, and welcoming enough to encourage an imaginative - or even physical - experimentation with your offering?

Here's an example. You go to a flea market and see an overwhelming sea of products for sale, for cheap, but of unknown quality and with zero organization. That's far less appropriable for you than going to a smaller flea market that specializes in some of the things you like to buy, and then finding the right table, with the right sales people on the other side. The information they provide is rich and complex. They may be personable. They may well empathize with your interest in what you're trying to buy. And you can touch what's on the table. That environment is much more appropriable for you. Some of these characteristics are the small, microscopic parallels to what can make a big company successful in a multinational context: focus, richness of context, well-framed experience, trained employees that show empathy ...

This is but one example of what can facilitate -- or impede -- a consumer's ability to appropriate parts of the experience you're providing. Research shows that US consumers can be usefully divided into one of several "consumer styles". (These vary by culture, although some overlap exists.)

And as for framing. I'll leave a full discussion for another day, but consider the Joshua Bell video. What is the true beginning and end of the experience, physically, and in time? What's the value frame surrounding a street musician with his violin case open? These are some of the components that frame an experience. If it's not framed, it's hard to engage in it, and it's really hard to remember it.

Think about it, and how you might change the frame to make sure that Joshua Bell's incredible talent to interpret the world's most beautiful music, is appreciated -- even appropriated.

Interesting stuff!

Comments welcome!

When customer value management destroys customer value

One of the practices typically employed by CRM consultancies and larger companies is something called customer value management. In a nutshell, CVM defines a customer by his or her "profitability". This is sometimes difficult to asses, since you have to track operational and marketing costs per customer (or make some educated guesses), and then allocate those costs against your per customer revenue. The simple calculation of revenue minus allocated costs can get you started. You can also look at the odds of keeping customers year over year, coming up essentially with the financial equivalent of a decaying pile of uranium (same math predicts half-life). The greater the odds of keeping customers, the more the impact of their profitability (or lack thereof) will have on firm performance.

So, the idea is to make the best customers (most profitable customers) as loyal as possible, and to diminish the negative impact of so-so customers and worst customers (money-losing customers). Some firms even promote "firing" the money-losing customers.

Sounds all good in theory.

But here's a PERFECT example of how customer value management can create major headaches for companies, not to mention that the company in the article -- a financial services firm named Egg -- forgot the first rule of business. If your customer has a share of wallet that you do not yet own, figure out how to own it. In short, if you've got unprofitable or less-than-ideally profitable customers, maybe you're just engaging them incorrectly.

Egg bought by US-based Citigroup for £575m.

UPDATE:
I've been thinking about all this. The key thing for banks is to make money off what they lend to you, or on the fees they can charge you. In the article, essentially Citi is using the CVM strategy of "firing the least profitable" customers because these customers pay off their credit cards. From a "get corporate value fast after this Egg acquisition" point of view, that makes sense.

BUT.

Look at the potential for total lifetime customer value for these "low profit" customers. How do they pay off their credit cards? With earnings. Perhaps they pay them off because the personally value having low debt. Perhaps they pay them off because they can, but not necessarily from a desire to be debt-free.

In either case, Citi has a segment it can market to. First, for those people who don't want to have a lot of debt, and have excess cash to pay of their credit cards, Citi could approach them for investment accounts, pitching these as "a better way to save money." This appeals to the value of building equity, not debt. As for the other segment that doesn't necessarily value building equity or eliminating debt (even though their behavior is to pay off their credit cards), the pitch might be a lifestyle one. Get more life out of your dollar. That might mean vacation accounts, for example. Or continuing education accounts.

But, these creative approaches aside (and they'd be hard to implement at Citi since I bet their marketing/product folks don't speak the same language as their accounting/finance folks), Citi still has a fundamental problem with their new Egg acquisition.

Pissed off customers.

And that means brand equity will drop. And that means the intangible asset value of the acquisition is dropping, like an egg.

Splat.

The Abrams Tank -- JJ Abrams' secret weapon is an unopened box

And a keen eye to real storytelling.

Cloverfield Viral Marketing

I mentioned the Cloverfield viral marketing campaign in my prior post. In the meantime, I've been doing a lot of research on effective viral marketing and have surprised how few people -- even the experts -- understand how to make such marketing actually work. My analysis is coming together as a new module that I'll be vetting with experts and then teaching in Singapore and Shanghai this quarter.

Part of what makes viral marketing so interesting is the post-modern commenting-on-the-commenting-on-the-thing that brings out the creativity of the fans and of the news media. These comments and creative riffs create another input into the network of opinions so crucial to reinforcing and spreading the "word".

The challenge, of course, is to make sure that the ultimate marketing goals are advanced: to promote a branded product or concept effectively. Snakes on a Plane, that famously used a viral marketing program, created a lot of online chatter, but the product itself was just terrible by most people's comments.

I don't think we're in that situation with JJ Abrams. He is one of the few auteurs in Hollywood who gets it. Case in point: His analysis of why Jaws was a great movie, which he revealed at a recent TED great ideas conference. Hint: it's not the shark scenes.