Enjoy, advocate and bond - the loyalty process in the digital age

Loyalty has always been about two things; getting a positive word and recurring purchases. To reach that goal organizations define small enough segments allowing them to overachieve their customers expectations. With a too broad defined customer base you will most probably not meet anyone's needs.
How does then loyalty work in the digital age? Is it any different from the traditional way?
The main difference seems to be that purchasing decisions are made much later in the purchasing process, majority in the store. The other is that influence from friends and social network are much more visible and play an integral role in the decision. The Enjoy, advocate, and bond cycle after a purchase is much more important than previous. It reinforces the purchase decision and drives recurring purchasing at a much greater extent than previous. The other is that it has much greater effects on what your friends decide to purchase.

So are your marketing Euros well spent? Are they in the store in due time for the purchase decision? Are they helping your customers to enjoy, advocate and bond to the product and brand?
Here are some ideas on what could make it simpler in the customer decision journey:

• Where do your customer encounter your products and services? Is it attractive to buy? Simple and convenient? Do capture the value and experience, do the customer have to make other decisions? Make the experience the purchase, not the product itself.
• What is the physical experience? Packaging, instructions, registration, etc.
• After the purchase, is the value there to be enjoyed? If the customer experiencing any problems, can they easily get access to support and advice?
• How can the customer advocate their purchase and experience? Which ways to express themselves through real world and on the web? If I buy a SAAB, will I get something that shows I have a SAAB outside of actually showing my car? Wallet, belt, shirt, iPhone app, email signature, etc? The more digital it is the easier to turn it into actual advocacy. If it is an iPhone app then you can easily share parts of it with your friends. 
• Bonding is a little bit harder as it requires more time to build up. The advocacy builds bond as well since a recommendation reinforces ones own perception.

Take aways: 

1. Purchase decision is much later influenced by friends. 
2. Advertisement Euros in the right customer decision journey steps. 
3. Ensure customer experience to start the reinforcement feedback loop. Experience, not discrete products that needs assembly.

More to read:

• HBR Dec 2010: Branding in the digital age

First Question in Stress-testing Your Enterprise Architecture: What is the driving purpose behind the business?

We've come to the first of seven questions to ask when stress-testing your Enterprise Architecture: What is the driving purpose behind the business?
The purpose of asking this question is to put the focus where it belongs: Why do we exist? What purpose do we have?
The answer to the driving purpose behind the business is underpinning all the other questions.

So how can the driving purpose behind the business be broken down into smaller pieces? Here's one way of breaking it down:

• What is the purpose? What value are we contributing to the world and justifies our existence? Some strategists claim that there are really only two main strategies possible to follow; cost focus addressing a mass-market or niche markets with value and segmentation focus. 
• Clearly articulate which of the two strategies you are following. In which terms is low-cost defined? How will low-cost develop over time? Which niches are you targeting now and will it be on segmentation or additional niches further growth will come from?
• For example IKEA, the furniture retailer, is following a low-cost mass market strategy. Adhering to a low-cost strategy its IT should be in line with that both from an IT perspective and from which business process support is most crucial. Within furniture retailing the supply-chain and store operations are most critical to maintain the low-cost of overall operations. Providing state-of-art supply-chain systems in line with operations, meeting their requirements of total-cost of shipping and keeping store balances in line with targets are among the most cost cutting actions IT can provide.
• What is the drive behind the business? What pushes it forward? Is it product development, customer satisfaction, geographic coverage or some other dimension? 
• Be specific on which drive your are focusing on right now. The drive varies over time and can be different things at different times. 
• For example Ericsson, the telecommunications company, were first driven by product development during AXE switch development, then by expanding globally through its product leadership, then products again when the mobile industry took up speed and now it is customer satisfaction in its professional services line. Following these shifting demands means that IT should shift focus over time. The critical issue is to know when to invest in supporting a certain area and when to stop further investments. It is as important to stop investments to afford supporting new growing dimensions.

When designing an Enterprise Architecture be sure to answer the question What is the driving purpose behind the business? and how it is supported, enabled and grown through the EA work.

More to read:

• HBR Nov 2010: Stress-test Your Strategy: The 7 Questions to Ask

Stress-test Your Enterprise Architecture: The 7 Questions to Ask

Defining an Enterprise Architecture enabling IT to successfully capturing the business requirements is a daunting task. Have I captured the essence? Will architects and business analysts understand it? Is it pushing our business forward through improved alignment between business and technology? Those sorts of questions are always spinning around when defining an Enterprise Architecture. A recent article in HBR "Stress-test your strategy: the 7 questions to ask" inspired me to think of the 7 questions that would help stress-test an Enterprise Architecture. Here's my take on those questions. In coming posts I will dive into each of the questions to further add some meat.
What do you think are the relevant questions to ask stress-testing en enterprise architecture?

Here's my 7 questions stress-testing your Enterprise Architecture:

1. What is the driving purpose behind the business?
• The enterprise architecture is there only to support the business purpose, right? Making sure that the architecture supports, enables and drives business is make-or-break. The reminding 6 questions assumes that the right business purpose is in the bulls-eye.
2. Which critical effect are you aiming for?
• Be extremely sharp on the effect that the architecture should deliver in its own right. It's easy to do a lot of everything and nothing of what is important. Measure and visually communicate current state and progress. Avoid finding yourself in a state of active inertia.
3. What is the key customer value proposition that is supported?
• Your customers turn to you because they perceive a very specific value offered. Align your architecture to support that value. Never find yourself in a situation where the architecture is considered state-of-the-art and the business struggling.
4. How is complexity being killed?
• Be very clear and upfront with how complexity is eradicated from both IT and business processes through the architecture. Scale back on fancy solutions. Simplify and design for evolution. 
5. Which collaboration is generating creative tension?
• Generating new ideas and improving execution requires extensive collaboration internally and with external stakeholders. Enabling and pushing collaboration through both tools and also more importantly through open access to the central business systems will spur further performance improvements.
6. How are the implementation boundaries defined?
• Central to any architecture implementation is how it is sequenced, domains affected, and what is not touched. Without clear boundaries scope creeps during implementation. There's always this domain or system over there that needs to be touched. Timing and risk will be severely affected if the boundaries are not well defined. What not to do is as important as what to do.
7. What architectural implementation uncertainties keep you awake at night?
• Your architecture is not better than its implementation. The success depends on the way it is implemented. To succeed you have to carefully monitor the uncertainties during implementation. Which parameters you choose to keep your eyes on has to be connected with question 1 and 2; business purpose and customer value proposition. Ensure that the implementation secures successful realization of those answers.

Designing and implementing a successful enterprise architecture requires making tough, sometimes hard choices. These questions will hopefully further refine your architecture making business success a fact. There's no magic bullet that can zero in on the pitfalls of your architecture - just hard work and diligent implementation. Only then can you be confident that your architecture is on track.

More to read:

• HBR November 2010: Stress-Test Your Strategy: The 7 Questions to Ask

Enabling knowledge sharing

Sharing knowledge among peers, colleagues, and partners enables new combinations of existing individual knowledge. How to decide when, how and to whom sharing should be performed?
Dividing stakeholders into two categories; key individuals and community; it becomes easier to separate when, how and to whom knowledge sharing should be done. Key individuals are the most important peers, colleagues and partners with whom you need to share knowledge. Community are the groups of people with whom knowledge sharing benefits both parties.
I will here outline some thoughts, guidelines and examples on using key individuals and community as means of identifying knowledge sharing requirements. As example we will use a global telecommunications company with a multi-site R&D organization with deep customer and external partner relations were to define which knowledge to be accessible to whom.

• Key individuals. Simplifies sharing efforts through being aware of the key persons enabling you to continually satisfy their needs. Identify who the key individuals are, their knowledge domains, when and how they need knowledge. Be very restrictive on whom to define as a key individual. It is advisable to have a discussion with each person to gather their personal expectations. Which knowledge, when do they need it, in which format and how to access it. 
• From the example: Identifying the key individuals among the different engineering organizations, customers and partners (in all 7 internal, 3 customers and 4 partners) opened up the opportunity to tailor communication and filtering the knowledge that was made available to each of them. Some wanted only working and verified knowledge, others wanted very early ideas. Among the engineering teams very open sharing is key to successfully build upon each others experiences. With partners knowledge regarding common projects that were patented to protect IP was shared. Through the individual attention paid to each one their interests can be met.
• Community. A broader set of people in each organization can be treated. These can be development teams,. business development, sales, support, etc. Their needs on knowledge are of course also specific, but through treating them as a community it is possible to still manage their needs. If not managing them as a community they will consume too much of your resources and benefits will not materialize. A community is a simple way of giving these organizations some special treatment without having to be personal.
• From the example: Within one engineering team in Spain they had developed a new communication and message container. The actual thoughts and technologies behind these were needed by the engineering team in China in their IPTV development. Through defining the Chinese team as a IPTV community (possible including others over time) they could easily define which knowledge was needed by IPTV and make it available to that community without thinking too much on who's on the other side. Following the agreed upon depth and timings enables the Spanish engineering team to control access and still keep efficiency.

Conclusion: Identify key individuals and communities of interested parties in the knowledge you produce and that will enable much simpler control and maintenance of knowledge sharing.

The forgotten screw - How to create culture of collaboration?

Language made man into what we are today. The ability to communicate between individuals and over distances can be seen as art-work and trade in human societies already 100.000 years ago. Jesus shared bread and fish among the gathered people and got back much more than he gave away. This illustrates that when you share and collaborate you get plentiful in return.
So how can we take language and the written word to the next step and become collaborators?

Research has shown that communication between people diminishes with distance and already 100 meters makes daily communication come to a halt. To foster collaboration in an ever more global world where interaction is not just done two floors up, but across oceans. Tools are important and necessary. Without the right mindset and culture it will be hard to make it work. Let's examine some principles to foster collaboration and knowledge sharing:

• Make it fun
• People are drawn to each other when they have fun. They share experiences, knowledge and build trust within the relationship. Ensure that there is a mix of old friends and newcomers to further increase the value of networking.
• Make it easy
• Remove hurdles and thresholds to collaboration.Can the tools be accessed on the run? Is the user interface simple and time saving? Can I find what I'm searching for? Is it free?
• Make it rewarding
• Make sure that competition, financial compensation etc are playing in the direction of collaboration. The collaborative culture and tools must give the most rewards, not the old way of working. Which resources and knowledge needs to be present to start collaborating from day 1?
• Make a change for change's sake
• Change the organization, responsibilities or products. Changing one piece at a time forces people to build new networks, collaborate with new people and generating new knowledge. All the time while old relations are kept.
• Make it measurable
• Measure the level of contribution. Rate people's contributions on how valuable others were finding them. Measure where connectivity and collaboration occurs. Are we missing something in between certain organizations or countries?

Have a sincere look at your collaboration environment. Are there screws forgotten here and there? Representing lost value and rework. Knowledge and experience not shared. Are the right departments working together? What about measurements?

Get started with creating a culture of collaboration and knowledge sharing!

More to read:

• MIT Sloan Magazine Fall 2010: The Collaborative Organization: How to Make Employee Networks Really Work
• Crowdsourcing by Jeff Howe

Seeing is believing - how visualizing the innovation portfolio makes better decisions

Running an innovation organization effectively requires close control of two disparate dimensions - the value of the portfolio (regardless of currency - $, time, IP ...) and how investments are made (regardless of currency - $, time, IP ...). Keeping an eye out for opportunities, spotting potential issues and making prioritizations between different projects requires a good visual representation that enables all stakeholders to grasp their share of interest.
What can then be said about how such a visualization tool materializes? Which decision types are helped through improved visualization?

• Set a goal of killing at least 10% of all projects each year. With an average running time of 2 years that means that 20% of all projects get killed. The number has to be adjusted for actual project duration. 
• Decide on which metrics to measure for killing decisions. Is it time ahead of competitors? Is it potential revenue? Is it time-to-market combined with potential value. Make that number visible and make sure it gets updated regularly. 
• Set a goal of only running 20% of your projects at any given set of time. If average number of projects is 2 years that means 10% running in parallel. Measure and visualize project duration, time-to-market ((time left * market value)/resources ($, people, etc) and alignment with current strategy.
• Define share of projects on different levels - extension, incremental or radical. Kill projects from each category to keep the balance and loose in the long run.

These are just a few examples of the importance of measuring and visualizing the performance of the innovation portfolio. Which are your favorite way of illustrating innovation portfolio status?

How to formulate your strategy through co-creation?

Strategy work is often done by senior executives based on their point-of-view. While their view is often correct, it does not involve all perspectives from not just the internal stakeholders. Especially external stakeholders are left out. We think of them and their needs, but they are seldom involved. How can we then know that their needs are met?
Especially true is this about our friends in the value-chain. Based on Porter's Five Forces we try to create a strategy that gives us the largest bargaining power enabling us to carve out the largest share of profits.
What if you involved inside and outside perspectives in you strategy creation? How would such a process be like? Who would it involve? What results could come out from it? Which tools to use?
Based on a recent article in HBR October 2010 I will try to add something on tools to use. For further background, please read the article.
Challenges with traditional strategy processes are:

• Focused on economics of the firm and its industry
• Internally focused on the firm and an inside-out perspective on the industry. 
• It fails to allow for the possibility of co-creating an ecosystem whose members all win
• Growing the pie before the fight for shares begin
• Assumes that a strategy can be defined on the outset, though uncertainties often make that impossible
• Incremental approach that allows for learning and engaging outside and inside stakeholders

While thinking on how to co-create a strategy, I started to think on which tools are available to counter the issues listed above. Here are some of the tools you would need:

• Appreciate Inquiry
• Appreciative Inquiry focuses on the affirmative topic chosen. The set of questions defining the topic will enable everyone to focus their energies and ideas towards this topic. Involving many people will get them to work towards this topic and thus not go in all possible directions. Based on the topic the co-creation process is led towards a solution to that topic in an affirmative way. 
• Collaborative IT platforms
• Involving many stakeholders from throughout the organization and from external organizations requires each individual to collaborate and interact individually. A comprehensible IT platform enabling groups of people to collaborate together will drive results between opportunities of face-to-face meetings. The collaborative IT platform need to answer questions like: How spread out are your people? Which bandwidths do they have access to? What type of problems are we working with, numbers, visual, text, etc.
• Goal-hierarchy
• A Goal-hierarchy is a  very powerful way of illustrating where we should end-up. The top goal is related to the set of affirmative questions identified through Appreciative Inquiry. A goal-hierarchy answers questions like: Which goals reside in each organization or group? Which activities lead to that goal? Who are doing the activity?
• Experimentation
• The results from Appreciative Inquiry are based on co-creation involving internal and external stakeholder. They are still not validated in reality and for that you need to start small through experimentation. Which are the minimal features you need to test before you can say whether this will work or not? What result is the most critical? Create and execute experiments for these parameters to validate their legibility. Then grow the size of roll-out, risk and commitment to the new strategy. 

Which other tools are useful co-creating a strategy?

More to read:
HBR Octorber 2010: Building the Co-Creative Enterprise

Experiment driven innovation - How to use data creating novel business models

Organizations will in the future be far more responsive, far more innovative, far more analytics-minded. Experiments drive the data collection necessary to create and develop new novel business models based on customer behavior.
Which practices and methods do you use to collect real world data when creating, developing and refining you business models? The basic foundation is that in order to develop new and more valuable business models we need to collect better data. And data that are based on real behavior, not just surveys. The problem is usually where to find that data, how to analyse it and based on that knowledge draw conclusions. Here are some thoughts on how to use experiments to collect more and better data that drives innovation and novel business models.

• Go to the source. Don't let the IT department alone decide on which data and where to collect it. It is usually at the point of sophistication within the organization where the need is defined. The IT department can provide technical knowledge and tools. However, it's important that those tools are flexible and open enough to allow a wide variety of business needs to utilize them in many different settings.
• Experiment on experiments. Don't plan your experiments, rather experiment on which experiments to run. Be agile and have an environment of short turn around times. How fast can I define an experiment, execute it and collect the data? Even more important - how fast can I make changes to running experiments to counteract abnormalities. Be open, and re-evaluate your experiments often making sure you get the quality and data sets needed to see your customers need and develop business models fulfilling some of it.
• Visualize data. Make data available to everyone. It has been invested quite some money into your experiments. Others may see value in the data that you don't need. When visualizing the data new patterns and conclusions might be apparent. 
• Culture of experiments. Will your corporate culture allow experiments or will it preserve current processes? It is crucial when succeeding with experiments that there is a wide-spread support within the organization for experimentation - and for failure. In some cases failure is the best outcome since a lot of effort into otherwise doomed ideas are saved.

New business models in the future are based on thorough data collected through frequent experimentation. Organizations will no longer be able to just "think" new business models - they need to collect the data necessary to draw those conclusions. Which tools do your organization provide to do frequent experimentation?

More to read:

• MIT Sloan Management Review Fall 2010: 10 Data Points
• Dan Ariely in HBR April 2010: Why Business Don't Experiment

Crowdsourced innovation strategy through collaborative IT tools

Crowdsourcing your innovation strategy within the organization sounds like the perfect idea generation mechanism. When Whirlpool started to use IT collaboration tools in the mid-2000's to collect, share and collaborate on innovation projects it not only increased the likelihood of serendipity. A side effect was that you could track which ideas were hot - aka which topics people across the global organization were working on. Was it design, pricing or sustainability? By counting the number of projects and ideas within each domain and topic a bottom-up innovation strategy was built. Those hot topics set the innovation agenda. Crowdsourcing the innovation strategy has several novel advantages:

• Don't bother spending time and energy on what to focus on - let your people across the globe decide implicitly through how they spend their time 
• Don't think on how to engage employees and changing the innovation agenda - it's changed by engaged employees in real time responding to changes in requirements and the context where you do business
• Don't have special activities to connect people and organizations - they will find and connect with themselves were it makes sense 

Serendipity and prioritizations happens by themselves through bringing smart people together sharing ideas. Using a structured IT tool fostering collaboration will not just connect people from far away. Such an IT tool will also enable progress tracking, KPI collection and idea repository. Choosing the right IT based collaboration tool requires you evaluate and decide on:

• Who will use it? Will it be a smaller or larger set of people inside the organization? How will you engage external parties such as universities and startups?
• How will you track progress? How long will you track the progress of an idea? Will you use it as a repository to store ideas or will it be more of a project management tool as well?
• What external material will be available through the site? Who will manage it and update it? Should it be only links or will you store it locally as well?

The answer to these questions sets the foundation on what kind of IT collaboration tool you should use when enabling your employees to define the innovation strategy from the bottom and up.

Change is hard - status quo is painful

Change is hard for many reasons and for most people. First and foremost any action that gains a reward will be repeated. Secondly, only practical actions will lead to actual change. While you think of a change needed, nothing will happen until you actually act upon that need.
So what are we doing right and how can we enforce that behavior?
Marshall Goldsmith has in his The Success Delusion shown that humans, and in fact any animal, reinforce successful behavior. The more successful we become, the more positive reinforcement we get - the more likely we are to experience the success delusion: I behave this way. I am successful. Therefore, I must be successful because I behave this way. The chain of conclusions is just plain wrong. We all hear what we want to hear. We want to believe those great things that everyone is telling about ourselves. That belief in ourselves is what helps us become successful. It is also what makes it very hard for most of us to change.
You are successful! You are doing a lot of things right! Why do you need to change? Humans, society and the world are constantly changing. You current behavior that is contributing to your success needs to change in order to stay successful. If you don't change then you will eventually find yourself in a situation where people will consider you less successful. Or current successful behavior that helped getting us to our current level can very easily block us from going to the next level of performance. So change is needed to stay put and to develop further. Status quo will eventually deteriorate our performance and not lead us to develop our skills and performance any further.
How do you then change?
Analyzing what actions need to change might be easy. However, it is very easy to fall into a problem focusing exercise where you end up emphasizing on problems instead of what is working. Start identifying what is working today and what you are really good at. What new behavior should you add? By doing more of what is working and what will improve your future performance you will do less and less of what is not part of the new you.
So what about the how?
Now it becomes harder in my own experience. It's easy to say that I want to behave in this or that way, much harder to actually change the behavior. Here are some real world examples of turning insight into action:

• Start acting. Just do it to borrow a catch phrase from Nike. When Toyota incurs change in their own organization they follow a very simple 3 step model. Identify change needed, start acting, explain and conclude what actually happened. The importance here is the action before explaining why. Just do it!
• Make action steps concrete. Make them possible to act upon. "Listening to customers" is not possible to do here and now (unless you actually go out and ask them questions ...). Turn it into concrete actions; what does it mean here and now to listen to customers? If the customers are saying they don't want to wait by the checkout, then have the cashiers call for help anytime more than one person was waiting. That is possible to act upon.
• Make a goal hierarchy. Break down your overall goals into actionable goals. Connect actions and people to each of the goals. Follow up you actions that leads to the higher level goals.

This way you turn insights into action. Action into new behavior. New behavior into further success.

More to read:
Marshall Goldsmith Library: The Success Delusion
Fast Company September 2010: Tase the Haze
MIT Sloan Management Review Winter 2010: How to change a culture: Lessons from Nummi

Innovation governance while user innovation flourishes

Letting a thousand flowers bloom when enabling your user community to innovate sounds promising. Eventually there must come something good and novel out of such a process, mustn't it?
While having your user base innovate for you is hard in itself, collecting and actually producing real products and services out of that is the real hard nut to crack.
Look at Lego who invited their users to innovate new sets out of the basic building blocks. A tremendous amount of creativity and energy went into coming up with new designs. From those designs Lego collected the most popular ones and turned them into retail products. The rest remains on the web-page for everyone to download and find the pieces themselves.
The main difference here compared to most organizations is that the main activity in playing with Lego is to build things from scratch. The most exciting creation is already today seen with much envy and heavily copied. So the DNA of the product is to create new designs.
How do you translate this into other products?
You need to clearly govern your innovation work making sure you capture the most innovative ideas from your users. How can I govern my innovation process?
We have found that the following areas are helpful in identifying where to focus your efforts when dealing with customer interaction:

• Involve the Lead users
• Who are your most innovate users? In which environment does the most creative new ways of using your product thrive? Identify where innovation is most likely to occur and watch users closely. Invite yourself to watch, talk and co-create new uses. Give them specific tools like Lego did when creating special software to design and store new sets to be posted and shared on the Lego web-site.
• Define goals and measure effects
• When executing innovation projects, what are the goals? New products, new usages, new segments, lowering production costs, or something else? Establish measuring and visualization on a daily level so that progress can be viewed and measured with short feedback loops. Why everyday, isn't that too often? Most of the tasks in an innovation project are repetitive and trackable. Involving users means that you probably have hundreds or thousands of users involved in all kinds of experimentation and design. That activity needs to be measured and visualized to enable progress and not turn it into chaos where you don't know what is actually going on.
• Resource allocation
• How do you assign resources to new projects? On which parameters are new initiatives weighted and prioritized? Having  resource fluidity where resources are flexibly assigned to projects regardless of their home turf of the resource owner is one of the most important ways to create strategic agility. When a user comes up with a new usage it should not be up to that specific organizational unit to decide on how to explore it. Resources has to flow between units and organizations to enable fast leverage of the opportunity.

Govern your innovation efforts through flexible resource allocation based on clear set goals and effect tracking in collaboration with your lead-users. This will maximize your return on innovation where early and close user involvement and customer interaction secures clear user benefits. Your innovation employees will combine their product insights with users everyday knowledge of how to apply the product.

Everyday Hacker - everyone's not a designer

Participation is the new brand loyalty. What is better for participation than inviting your customers to do the personal customization themselves? Designing stuff for people to like and hope for their loyalty in return is not going to work anymore. Troed Troedsson, a future researcher, has found that up until the mid-eighties the key differentiator was knowledge. Nowadays it is understanding. Understanding what your customer wants and desires. Who is better on understanding their needs than the customer herself?

There are several very good examples on how to engage the customer in participation and designing according to their own desires and understanding on who they are:

• Make your own chair. Buy a cubic formed chair with a hammer. Use the hammer to form it as you like.
• Hacking IKEA. Make a children's chair out of a normal chair buy sawing a hole in the seat.
• Fan popcorn popper. When buying a popcorn popper, get it with your favorite team logo on it.
• Amazon Webservices. Build your own Amazon bookstore using the backend features of Amazon.
• Cookies and cakes. Buy a cookie mix and add eggs (Dan Ariely showed that without the eggs there is too little participation).
• Scion car designed by you and manufactured by Toyota together with a backbone of 1000's of partners.
• Threadless combines custom T-shirt designs with easy to shop for those who don't know what to design.

What should you think of when entering the mass-participation era?

• Design for different levels of customer participation. The occasional customer, the regular and the hard-core.
• Make it easy to switch between levels of participation. Make the customer a success regardless of participation.
• Enable your IT systems and supply-chain to handle great flexibility. How to plug-and-play in the back-end towards partners? Can you be as flexible as Toyota with Scion where the the car is manufactured and then pimped by one or more partners through an advanced supply-chain?

Then of course there are always those who don't know what they want. Be sure not to confuse them with alternatives. Make it easy to participate and co-create or you will loose everyone except the most hard-core fans.

Finally you will get many more ideas on how to develop your future products through the understanding gained from your customers.

More to read:
March 2010 article in Wired: Destroy is the new DIY
Dan Ariely in The upside of Irrationality

How may we help? Increasing loyalty by reducing effort.

Customer loyalty comes not first and foremost from satisfying your customers - it comes from reducing the effort of dealing with you. CES or Customer Effort Scores is a new predictable way of measuring loyalty from the customer base that have been in contact with you. CES predicts the future loyalty and revenue levels. CES can be used to measure direct effects from customer service interactions - in terms of ease of effort which increases loyalty and contact levels which lowers customer support costs.

Meeting customer expectations and reducing effort during customer interactions requires you think of the following:

• Head off the need for follow-up calls and interactions - anticipate the future
• Normally you measure the First call resolution level which indicates how good you are at solving customer problems in the first call. Measure return calls on a slightly longer horizon, 1 or 2 weeks, and you will see that certain types of calls generate subsequent calls for other related problems. Measuring and analyzing these downstream calls will improve your service quality and remove the necessity of future calls. Saving both your resources and lowering the effort of being a customer to you.
• Address the emotional side of interactions - who is at the other side?
• Sometimes we give the same answer and motivation to all customers. Try to balance the emotional mode they're at and their personality. Based on wording the customer uses and how they say things, give slightly different responses. To some your empathy matters, to others exact date for when a replacement will arrive is most important. What will the customer's feeling be after the interaction has finished? That will determine both additional calls, their view about you and the effort of interacting with you.
• Learn from disgruntled customers - how do you continuously improve?
• Disgruntled customers are disgruntled for a reason. They had some expectations that you have not been able to live up to, right or wrong. What can you do to improve your delivery and communication to further improve your delivery?
• Empower the front line to deliver a low-effort experience - what policies are blocking them?
• Measure things like "Ask once" and "Capturing the no's" enables you to identify when your front-line is not empowered to service a customer request. Having a front-line that can handle the entire interaction shows that you care about your customer by trusting the ones handling customer contacts. They're not just a filter to turn away customer requests - they are there for me as a customer.

CES, Customer Effort Scores, captures the customer impressions at the transactional level, negative and positive. It is at the transactional level that you build real loyalty - not on the brand level. Ask the question "How much effort did you personally have to put forth to handle your request?".

High levels of CES affects your internal delivery costs as well in terms of repeat calls, call transfers and channel switching. Performing a CES finally enables you to catch customers at risk of defecting and thus you get a last chance of keeping them.

More on this subject can be found in this HBR article: Stop trying to delight your customers

Front line service innovation

Front line workers are the ones who delivers real customer value in a service organization. Drive value creation and innovation through front line employees is the way to improved efficiency and new services. How do you efficiently innovate through the front line? After all they are not hired to be innovative, their task is to deliver service and support customers.

First of all you must define the questions you are trying to answer through front line innovation.

• Innovation of new services?
• Improving the efficiency of service delivery (deliver it the right way)?
• Improving the effectiveness of service delivery (deliver the right service)?
• Empowering the employee?
• Collaborating and involving the customer?

Front line service innovation leverages the direct customer experience, knowledge and quick round-trip time that enables experimentation. The trick is to empower, engage and motivate your front line people to take care of new ideas that comes flowing while working.

Kaiser Permanente, a Health care provider, has introduced a small team of special trained innovators called Innovation Consultants. These innovators can be design specialists, anthropologists or psychologists. They work according to a "human centered design"  principle where they involve the front line and their customers in improving efficiency and effectiveness at the same time as they innovate new services.

• Uncovering the untold story. Since most innovation and efficiency increase comes in the interface between the front line employee and the customer it is important to uncover the untold story. Things that get neglected because they have always been that way. Or you don't see them consciously where drawing a picture of how you feel when interacting in that situation will reveal you inner feelings. This leads to more sharply defined problems ready to be solved. 
• Packaging change. Every innovation results in some kind of change being executed. The innovation starts somewhere and then it all starts. How should it be replicated throughout the organization? How to measure its effectiveness? Applying the 5 Implementation principles enables an organization to quickly and successfully roll out a new service and still build upon employee engagement.

By working and empowering front line employees an organization can significantly increase both their innovation power as well as collaborating more closely with their customers. This leads to increased revenues through new services and rising profits through increased efficiency.

More to read on Kaiser Permanente's Front line innovation

When price isn't enough: Experiment

When your customers behave as though your products are commodities and focusing on price only, what should you do? No one want their products to become commodities. We strive for differentiation in both brand and features. Then we expect the customer to pay a premium and become loyal to our superior products.
Well, unfortunately customers are more lazy than that. They see switching costs as more important than premium. Low expectations on products actual and usable features combined with routinized behavior is commonplace. Researchers call this a psychological state of mind that drives commoditization. It is no longer the actual features, or lack thereof, it is the mental map of the customer that drives their behavior.

What should we then do to circumvent this behavior? Experiment on price! Use differentiation of price as one way of getting your customers to notice the difference in offerings. You don't know what your customers prefer and how you actually compare to the competition. Instead of guessing, experiment with pricing and products.

In several different experiments (one referred to in Dan Ariely's excellent book Predictably Irrational) customers get two similar products with different price (the more expensive has some additional features). Roughly 60% goes for the cheapest and 40% for the more expensive one. Adding a third product priced well above the previous expensive product shows interesting customer behavior. Now 10% goes for the new most expensive, 60% goes for the middle (previous most expensive) and 30% for the cheapest. By having an expensive alternative to compare against customers tend to go for the middle priced product. Viola, we have moved 30% of customers upwards just by introducing a product we don't want them to buy - just compare against.

Could we know this ahead of the experiment? No, just guess. A simple experiment helped us gain more knowledge. Will it work for you? Don't know, try it out in a smaller test market or segment.

Here's some more strategies to try out to circumvent commoditization:

• Use price structure to clarify your advantage
• As you could see in the example above, a pricing structure forced your customers to closer investigate the features of each individual alternative in the structure.This is taken to the extreme in Chris Anderson's Free where one model is called Freemium which starts at the price of 0 and goes upwards.
• Willfully overprice to stimulate curiosity
• When customers are faced with a product priced higher than their mental expectation they actually do investigate it further. What additional features does this have that I may have overlooked before? Beware that you better have some valuable features, otherwise they will dismiss you without further consideration in the future.
• Partition prices to highlight overlooked benefits
• Break bundles into their components and itemize the bill. That forces customers to investigate what they are paying for and start valuing what they are buying. Beware that this can only be done on products and services that they potentially value.Don't list the price of screws in your package.
• Equalize price points to crystallize personal relevance
• With many alternatives targeted towards different tastes, use same price to force the customer to see what they value rather than price. Then we get the customer to put focus on something else than price when comparing.

Experiment to see which of these strategies work for you and what the actual price should be. And gone are the days of commoditization in the eyes of the customer.

More to read:

• HBR May 2010: How to stop customers from fixating on price

RUSH-data enabled through Enterprise Architecture

In a turbulent market an agile organization requires RUSH-data. RUSH-data stands for Realtime, Unfiltered, Shared and Holistic data. An organization with access to RUSH-data has the building blocks to become agile and act upon market changes with unprecedented speed. It does not, however, guarantee that it moves faster and more vigorously than others.

• How do you enable RUSH-data? 
• Which parameters to tune? 
• How can Enterprise Architecture help setting the level for where to extract the data and when? 

First an example to get the thoughts flowing. Zara, the Spanish fast-fashion retailer, co-locate staff from design, manufacturing, supply-chain and store operations in units of 240 people per cohort. That enables the people to share unfiltered data in realtime enabling them to get an holistic view of the current state. That enables them to respond much quicker to market demand and get new designs in stores within 3 weeks instead of 3 months for competitors. The cumulative effect over the years has led Zara to outpace their competition in growth and profitability.

Where does Enterprise Architecture come into play? Isn't this a case for not using Enterprise Architecture and trust oral word-of-mouth instead of complicated ERP systems? Well, it could be if you don't succeed. But we've done communication for thousands of years and still only Zara manages to leverage human communications. So how can Enterprise Architecture help here?

First of all you must have a culture of information sharing and thirst for more data. Otherwise no system in the world can save you. Prepare for a funeral ...

Then I believe Enterprise Architecture can help in these ways for each element of RUSH-data:

• Realtime
• EA sets the non-functional requirements for gathering data. Is it set for real-time or only providing snapshots? How does the snapshots accumulate across IT systems? Will it distort data accuracy and age?
• Which data needs to be available in real-time to enable RUSH-data?Aggregation of data across systems often leads to distortion disabling real-time attributes. When designing the EA design for RUSH-data.
• Unfiltered
• Is data available from its sources or only aggregated in reports with conclusions drawn? Can anomalies be traced or is it averaged and crunched to nonrecognition? Trends are important - however trends indicate strong movements. Developments grow from small significant anomalies that needs to be traced and identified. 
• Shared
• Collaboration and sharing of information is crucial in todays turbulent markets. A large component is to have a culture of sharing. Assuming a sharing culture, then how can EA drive sharing? Through assigning roles and ownership of data it will be much easier to decide upon how and to whom information should be available and in which format. Through an SOA information can be both unfiltered and shared in the right format to each person.
• Holistic
• EA is very good at identifying information ownership throughout an organization. Which master data combined with realtime information from the source will give a holistic view of how we're doing right now? Work on reducing the information size to craft the data-set needed to get the holistic view. Then create services that supply that information in a dynamic manner. Through the SOA the information can be shared, unfiltered access to raw data in realtime. RUSH-data made real through Enterprise Artchitecture.

Next thing to do is how to visualize RUSH-data. What's your opinion on the best ways to make visualization simple, fast and collaborative?

More reading:

• Don Sull's blog on RUSH-data: http://blogs.ft.com/donsullblog/category/rush-data/
• Matthias Scholander on the CIO Perspective of RUSH-data: http://www.matthiasscholander.com/2010/08/strategic-agility-the-cio-perspective/

Enterprise Architecture creating the engine for network-based business models

In a world where the network-based organizations are creating the new business models, Enterprise Architecture play the key role in making it all happen.
Value chains represent all activities performed to create the value experienced by a customer. Michael Porter has described this in his 5 Forces where the relative strength of each participant is reflected in the amount of profit they can extract from the value chain.
The business model is the engine in a firm's network-based strategy in how to cooperate with others to create value. The business model therefore plays a crucial role in determining how much profit a single firm can extract from the value chain.
In a value chain there are four sources of value creation; Novelty, Lock-In, Complementaries, and Efficiency.

Two questions that struck me are:

• How can a single firm control and steer its business model in a network-based value chain? 
• How can Enterprise Architecture enable the business model to become the engine through leveraging the four sources of value creation?

I think the answer to both questions can be found in using Enterprise Architecture, EA, to guide and steer successful execution enabling the four sources of value creation. Most transactions and interactions, if not most of the value, are created through IT systems. Enterprise Architecture will enable an organization to identify the most crucial parts of its IT system that creates the four sources of value creation. Once identified the organization can through Enterprise Architecture focus its effort on each of the four sources:

• Efficiency
• Integration with other partners done quickly and with no effort. Finding the best suited product with low search costs. Reliable lead-times and costs.
• EA focuses on the business processes and information exchanged. Thus it is possible to remove bottlenecks and based on which levels of efficiency creates the most value put the efforts there.
• Complementaries
• Flexibility in terms of vertical and horizontal integration. Offer additional services and products that complement the product. 
• EA will based on which types of vertical integration is available enable fast and smooth integration. Information necessary to provide data about available complementaries, especially those that change over time, is identified through EA.
• Lock-in
• Raising the switching costs through efficient loyalty activities. Recognizing me as a customer. Not just discounts but more importantly access to improved information, priority, customization, etc.
• EA identifies which information and business processes that drive the most customer loyalty. Providing that information through the different processes and through the value chain enables larger shares of profit to be extracted.
• Novelty
• Enable flexibility in terms of transaction structure, transaction content, offerings through network of partners and complementaries.
• EA does not only focus on the current state of affairs, but more importantly where the organization is heading. Areas where Novelty are important will be identified and necessary information, business process and IT system support is created.

I think you should ask yourself: What is you position within the value chain? How are we utilizing the four sources of value creation within our current business model? Which IT system support is needed?

Further reading:

• The Network Challenge: Strategy, Profit and Risk in an Interlinked World by Paul R. Kleindorfer
• TOGAF 9 A Pocket Guide by Andrew Josey

Designing experiments for succeeding or failing in a turbulent world

How to design experiments that surface flaws in your mental maps about what the future holds? Succeeding in turbulent times requires the commitment to action while knowing that your map of the future is flawed. Running experiments is the single most important activity singling out what will work and what doesn't. Based on the knowledge gained through the experiments and your increased understanding you can redesign your mental map and increase the likelihood of succeeding.

There are two domains we need to understand better to succeed. That is to identify deal killers and knowing what we are betting on.

• Identifying deal killers. Which events will kill your idea or business?
• Knowing what we are betting on. Which unique things are we dependent on to succeed? What will drive customers to our offering? Not the inverse from deal killers.

Getting the cold reality of flawed mental maps enables us to spot weaknesses and opportunities we didn't know beforehand. Experiments lets us under control and with limited bets get a better picture of how our mental map of the future actually fits with reality. Here are five ways of running experiments:

• Partial experiment. Test one attribute at a time. Test parts of a deal killer or bet.
• Design holistic experiments. Test multiple variables and the interactions between them on a small scale. Could also be a test launch before a larger roll-out.
• Explicitly consider trade-offs. Cheap Fast or Certain. But not all three at the same time. Limited budget? Go for cheap on the expense of certainty. Need it fast? Put in more money to match the speed and certainty needed.
• Stage your experiments. Start small and try out the major killers or bets early. Once decided - go all in for that variable and execute the experiment. In between experiments there are room for discussions - during execution it is focus on results. After each experiment evaluate and decide on next step based on results. Don't hesitate to change your mental map - after all that's what the experiment is all about. Validating and finding more/better facts for the mental map of the future.
• Avoid experiment creep. Stick to what you decided during an experiment. Don't let findings during the experiment let you deviate from the set experimentation plan.If the results are not as expected - don't interpret them in the most positive way. Change the mental map instead.

How are you running your experiments and what value do you get out of them to clear the fog of the future?

More to read:

• Don Sull: The Upside of Turbulence
• MIT Sloan: The 4 Ways IT is Driving Innovation. How IT helps drive experiments.
• HBR: How to design smart business experiments?
• Dan Ariely: Predictably Irrational

Has Enterprise Architecture reached its Plateau of Productivity?

Enterprise Architects pride themselves with driving IT from a business perspective. Are they doing that or is it just another case of technology driven IT? This time with structure and control as underlying forces.

What shall Enterprise Architects do to really benefit their organization and add value?
There are two main drivers that you as a business leader have to balance between; Exploitation and Innovation.

• Exploitation. Exploit any given opportunity to the maximum. Be as efficient and operate with low cost. The IT delivery itself should of course be Lean. But more importantly it should enable other departments to be lean in their processes and operations. Embrace possibilities. Don't be too reliant on standards, especially IT standards. Let each business area decide what is best for them in terms of functionality, not in which system to use. 
• Innovation. Innovate within the IT delivery. How can we help the business being more efficient? Have IT drive Innovation, from idea generation to replication of new products, services and business models across geographies. Enable exploitation of new innovations through effective and efficient IT solutions. What should they look like? Well, be close to the business and listen, invest in agile IT support systems that are evolving over time. Calculate at least 25% of IT costs to be spent on new development, not just IT operations and roll-out.

The aim for an Enterprise Architect is to enable, guide and steer the IT delivery between these two extremes. Pushing Exploitation to be as efficient and extract as much profits out of any given opportunity. Driving Innovation to create new opportunities and being agile enabling new sources of revenue.

The most important things to get right are then:

• Interfaces. Let interfaces drive the enterprise integration, not standard systems. Service Bus is a technological solution to a business problem. Get the business solution right then the technology will solve itself. Having interfaces, common data models and master data drive integration will definitely drive integration across business domains in large enterprises.
• Collaboration. Share ideas, solutions and experiences across all silos. Collaborate physically and digitally. Use video, IM, YouTube, Twitter, etc to share and discuss across the entire enterprise. "If Xerox knew what Xerox knows" is a famous quotation from an organization inventing everything but not exploiting anything to their benefit.

Plateau of Productivity? Yes, unless we focus on interfaces and collaboration instead of steering and controlling Enterprise Architects have definitely reached the Plateau of Productivity. What do you think are the constraints for enterprises making more usage of Enterprise Architects to avoid the Success Trap of staying in the Exploitation domain and getting stuck?

Organizational rust and cholesterol

Organizational rust and cholesterol develops in every successful organization over time. In the book "In search for excellence" Peters and Waterman identified the 43 most successful companies in the US in 1980. Out of those 48 companies that were outperforming all other US companies only three would make the list today. What happened to the others?

It's an easy question to ask and much harder to answer. The background issues can quite easily be identified, the cure is much harder to prescribe.
A successful organization develops over time one or more of the following:

• Misuse of resources. The once successful departments get the majority of resources out of old habits.
• Misaligned strategy. What was once a great strategy and market position is today just stubborn actions.
• Leadership dissonance. Blame and backstabbing is spreading throughout the leadership team on different levels.
• Organizational immobility. Misalignment and inability within the different organizational units to move forward. It's one step here and one step there but never synchronized and at the right time.

How can this situation be fixed or even avoided?

In a recent HBR article on the theme "Change for Change's Sake" the authors argument that organizations should practice small and larger regular changes to practice the change organizational muscle. They propose a questionnaire that can easily help identify when it is time to initiate a small or larger change in order to avoid rust and cholesterol. 

An interesting thought is to measure the number of ongoing changes in an organization. How well are we at actually change? Do we have an ongoing readiness for change? What different types of changes do we have ready to apply if and when we need them?

What level of rust do you have in your organization and which changes of different size can you make use of?

How to manage several business models at once?

Facing stiff competition from new business models, regardless if it's new or incumbent organizations, is a challenge for any company. Customer loyalty is jeopardized, profits and cost structures are under at risk and careers can go overboard. Developing new business models is a challenge of its own, but how should my organization respond to the challenge of a disrupting business model in conjunction with our existing way of doing business?


Netflix is an excellent example of a disruptive business model. It works in two ways; first it operates over the internet avoiding fixed costs and local administration, secondly it uses the collective intelligence of its customers to make recommendations based on past rentals. Combined Netflix offers their customers simple and easy movie rentals with much higher viewing experience. How to combat that for an existing video rental business?
Should we:

• Focus on the segment that wants local video rentals taking the risk that they eventually will switch over to the Netflix model?
• Setting up a new business that competes head-on with Netflix taking the risk that we never will be able to do it better than Netflix?
• Creating a completely new business that disrupts Netflix and thus puts us ahead of Netflix taking the risk that our current business will cease to exist?

The text book guide is to either focus on a smaller segments that are not interested in the Netflix model (Porter) or setup a completely separate business with its own value-chain attacking the disruptor (Christensen). 

My take on this problem is to analyse the basic need that the current business model caters for. Can we continue serving these customers so well that they will never switch? If that is the case then change the existing business into clearly market that value and let the other customers leave for the disruptor. Then we have a healthy business that clearly provides a stable customer value that will continue to be there. If not doing this radical step quickly you risk loosing so much money and credibility that there is no business worth restructuring.

Then launch a series of separate businesses as experimentation. You don't know if the disruptor will eventually succeed or if it will create new opportunity and need for other business models. These experiments should both compete head-on and disrupt the disruptor. What's important is that each of these businesses operate separately from the others with its own culture and value-chain where it is necessary according to the business model (customer value, revenue model, cost structure, partnerships and profits). Cooperate with the rest of the organization realizing economy-of-scale where the business model does not mandate it. 

When facing disruptive business models one must be clear that the disruptor is starting small and moves fast. When the disruptor becomes large enough to threaten your existing business it is generally too late. The best prescription against this is to continuously run business experiments in small scale in different locations involving parts of the organization. Then you will try out market opportunities, find better cost structures and be ready for disruption yourself.

Inspiration for the post is from MIT Sloan Management Review article What to do against disruptive business models?

IT driven innovation

IT becomes a major driver behind increased speed and results from innovation. With manufacturing becoming a commodity and marketing increasingly hard and expensive many organizations are turning to innovation as the new revenue source. Innovation can create higher valued products from existing manufacturing capacity and simplifies marketing through improved experience.

IT greatly speeds up innovation and increases the effect in four areas:

• Measurement. How do you measure the current state of affairs?
• Experimentation. What is the value of this idea?
• Sharing. Who can benefit from my new knowledge?
• Replication. How to scale the new innovation throughout the organization?

These areas are important as separate activities and most organizations do one or several of them. They reinforce each other further magnifying the effect from each area. Improving measurements gives you better data easier and cheaper. Experimentation thrives on faster and cheaper measurements. Sharing those results further increases the value across the organization. Replicating successful business innovation enables faster scale ups and shorter time to market.

Measurements is radically improving the way we collect data and sort it. Nano data from click streams, emails, discussion boards, web trends, CRM, supply-chain, etc. Business intelligence is tapping into this area; needs to tap into the very bits and pieces of the nano data and make it available to the organization.

Experimentation through IT tools based on improved measurements. Measurement both to feed into the idea generation and to evaluate the effect from different ideas. Retailers can use IT to efficiently instruct different displays and then use improved nano measurements to follow up sales and profitability. New business models can use IT to track the consumption of goods and services through RFID tags on individual levels.

Sharing the results of experiments and the measures improves others to innovate. They don't have to invent the wheel again, can get the exact data measure setup, sharing ideas that for some reason failed (sometimes the most important aspect as failures seldom gets documented and less often shared).

Replication of innovations once they've been evaluated and proven is the key to successfully reap the benefits. The first three areas help organizations find and nurture new innovations. IT makes it possible to take that innovation and roll it out quickly and seamlessly. IT drives replication of business processes themselves. An example is how a bank is replicating a new loan process across all branches, a new customer return policy, displaying new food products in a retail store. Measurements enable the follow up of how well replicated the innovation is.

Collection of nano-level data is the foundation for IT driven innovation and replicating the innovation across the organization enables fast time to market.

Cognitive Surplus

What did you do before the web? How was it possible to find a restaurant in those days? During breaks - what did you discuss?

The world used to be disconnected and communication was one-way - from producer to consumer (unless it was from Aunt Annie - then it was totally wasted ;-)). We consumed what others were producing - clothes, food, houses, TV, radio, music, etc. Today we still consume what others produce - with the big difference of us being able to search for what we would like to consume - gone are the days of mass-market consumption. Using Chris Anderson's words - The Long Tail becomes the new Mass-market. We still consume - but not the same stuff. And that's why we have so few common things to discuss.
The even bigger difference that emerges is that we nowadays not only consume - we produce - and for free!

Instead of just passively consume what others produce - we now turn our time and energy into producing. The time previously spent on TV alone represent 1000h/year. That passive time is now slowly being turned into creativity - especially among younger people. Contributing to blogs, wiki's, Twitter, Linux, Facebook, etc are the new time-killer - and this time we fill it with thoughts, creativity and true dialogue. Spare-time previously spent on TV is now being redirected into creativity.

In the future each of us have some 1000h/year to spend on creativity. Shall we continue to watch TV and passively consume what other produce or start contributing ourselves? This extra spare time is what researchers call the Cognitive Surplus - the current passive time possible to turn into creativity. All Wikipedia entries represents some 100 million hours compared to 500 billion hours of TV in Europe and US - there is a large pool of time potential out there. Combined with our drive to do things that are engaging, interesting and because they're the right things to do. Spare-time, sharing technology and motivation of interest will enable us to become more creative - creating new topics to discuss during breaks (not because we have to - just because we want and we can).

Which Wikipedia article will you contribute to tonight?

Instead of TV why not read any of the following for more inspiration:

• Great spare-time discussion between Shirky and Pink on Wired
• Cognitive Surplus by Clay Shirky
• What motivates us: Drive by Daniel Pink

Watch your extreme customers

Your extreme customers are leading you into the future - explicitly - if you just care to watch.

The Chinese appliance manufacturer Haier uses their maintenance and repair guys to watch what customers are doing with the appliances. Where are they used, in what environment, who is using them and for what purpose. When a lot of washing machines got clogged with dirt they did not just assume the customers were stupid - they investigated the root cause. What did they find? That their customers were cleaning vegetables in them - can you clean clothes you should be able to clean vegetables seems to be the logic. Did they put big warning signs on the appliance - DON'T WASH VEGETABLES? Did they sue them or tell their customers it was their own fault?

No they changed the design to enable washing of vegetables as well as clothes. They watched what their customers were using their products for, listened to why they wanted to use it that way and then changed their behavior and designed a machine meeting the needs. Did customers notice what Haier did? Were they happy? The answer was loud and clear - market share in rural China went from single digits to 24% in 3 months in a market growing exponentially.

How do you start listening to your extreme customers?
First of all, in an article in Harvard Business Review April 2010 issue (Behold your extreme customers) researchers found that only 8% of managers cater to the needs of extreme consumers - so you will be pretty alone. Your extreme consumers can be engaged through for example:

• Let customers take ownership. Let the customers form communities, groups and influence/control product development. Lego took a whole new route after gathering their most devoted users and developed Lego NXT, the Robot Lego.
• Ask customers for help. Involve extreme customers in focus groups, ask them to test products to the extreme or suggest new designs.
• Sponsor events. Extreme events targeting the extreme customer. Costume dressing parties, all-you-can-eat festivals or invitation only parties where you must prove you're an extreme customer.
• Share consumers’ stories. Share in papers, advertising or on the web the most extreme usage of your products. Let your extreme customer become the hero.

How can you let your extreme customers drive your product development, marketing and brandbuilding?

What is a disruptive innovation?

Any organization that faces increased competition needs to sit down and decide whether they should go after volume and low margins or find some new hunting ground in a niche market.
Sometimes the competition has done that already. They jumped on the disruptive technology allowing a totally new price point to be met opening new previous untapped markets. Apple did it with iPod where they set a new business model and customer value proposition including a different profit model (making money on the scrap instead of music).
When we look around, which disruptive innovations do we see entering the marketplace?
I can think of at least two;
Tata Nano:
By thinking totally different about how to make a car Ratan Tata managed to create a car with a totally different price-point. Does it work in Europe or US? No of course not. Once Tata Nano climbs the value ladder will it work? Of course it will. What will happen to existing manufacturers? They will have to be squeezed in the upper right value corner. There will be no way for them to compete. Not because Tata is making such a great car but because it has a totally different Value Proposition and profit model run by a company with a different culture. This is disruption.

Google Nexus One:
Compared to Tata Nano Google is doing something different here. They attack the current value network of phone manufacturers and mobile operators. Currently you sell a phone subsidized with a subscription for 12, 18 or even 24 months fixed pay. The theory goes that you switch phone more often if you get it cheaper and then the operator gets you used to high monthly bills. Since Google is only interested in getting high penetration for its Android platform to sell more advertisements there is no need for profits on the actual phone. There is a new profit model here and value network. But is it bold enough compared to Apple and is it disruptive enough as Tata Nano? Currently I don't see those things clearly enough to determine if it is a truly disruptive offering or just a me-too.