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