The First Question to Ask of Any Strategy

• Roger L. Martin

MAY 5, 2015

The senior team of a large player in the global wealth management business recently asked me for my opinion on their strategy. They had worked long and hard at coming up with it. Their “Where to Play” choice was to target wealthy individuals who wanted and were willing to pay for comprehensive wealth management services. Their “How to Win” choice was to provide great customer service across the breadth of their wealth management needs. I pushed and probed, but that was it.

Sadly, like the majority of strategies that I read, this firm’s strategy failed my sniff test and for that reason I would bet overwhelmingly that it will fail in the market as well. The test I apply is quite simple. I look at the core strategy choices and ask myself if I could make the opposite choice without looking stupid. For my wealth managers, the opposite of their “where” choice was to target poor individuals who don’t want and aren’t willing to pay for comprehensive wealth management services. The opposite of their “how” is to provide crappy customer service.

The point is this: If the opposite of your core strategy choices looks stupid, then every competitor is going to have more or less the exact same strategy as you. That means that you are likely to be indistinguishable from your competitors and the only way you will make a decent return is if the industry currently happens to be highly attractive structurally. The wealth management company was targeting the exact same clients as every single global competitor and, like every other global competitor, they planned on giving them “great service.”

There are many, many such strategies. Perhaps the two most popular “strategies” are service excellence and operational effectiveness. All that can be said about them is that they are non-stupid and that is hardly an exemplary level of accomplishment.

The finest strategies are those in which other competitors do things largely, if not diametrically, opposed to what you do — and make money doing them. That means that you have made a distinctive choice. Vanguard made a real choice when it said it would not sell managed funds. We know it was a real choice because Fidelity focuses on selling managed funds, and makes enormous sums of money doing that.

It is not as though great service is a bad way to win. It is just that stated at that level of generality and abstraction, it is something that any company in the industry will strive for. Hence nobody does the opposite and it is really not a choice. Choosing to define service in a way that is different than others define it is a legitimate strategy. Four Seasons defines luxury as service that makes up for what you left at home or the office. Its luxury competitors define it as grand architecture and décor and obsequious service. Those are real choices because the opposites aren’t stupid; in fact other hotels do something that is reasonably close to the opposite of what Four Seasons does.

So do a little test of your strategy before committing to it. Ask: Is the opposite stupid on its face? Have most of my competitors made the same choice as me? If the answers are “yes,” you have more work to do to have a smart strategy rather than just a non-stupid one.

7 Proven Ways to Boost Customer Happiness in 2015

If you want to boost customer happiness in 2015, you have to take purposeful action.

BY SUJAN PATEL

 

VP of marketing, When I Work

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Happy customers are something that no business should ever take for granted, yet few companies make this metric a priority. If you want great business results in 2015, you can't focus on things like revenue and conversion rates alone--you need to be proactive about keeping your customers happy. Here are seven ways to do it:

1. Learn How to Measure Customer Satisfaction

You can't improve something you can't measure, so your first step should be learning to measure customer satisfaction. There are several ways to understand how customers feel about your company and service. For example, you could implement a telephone survey at the end of every service call, monitor online feedback, or create a web-based customer satisfaction survey to send to all of your clients. Keep in mind, though, that only those with strong opinions will take the time to answer, so you'll want to account for potential bias in the responses you receive.

2. Be the Expert

Your customers need your help--that's why they hired you or purchased your product. So take the time to position yourself as the expert in your chosen field. This does NOT mean spending all your time telling customers how amazing you are--it means honestly educating and empowering your customers to understand your industry in a new way. If you come across as an expert they can trust, your customers will be thrilled to work with you.

3. Use Live Chat to Offer Excellent Customer Support

Customers hate phone trees. It's a fact of business, and offering an alternate way to contact you can make a big difference in the level of customer happiness you see in 2015. One of the best ways to offer real-time customer support is to offer online chat straight from your website. This allows a customer to bypass all the button pushing and get directly to an agent who can help them. If you don't already offer live chat, put it on your agenda for 2015.

4. Make Sure Your Entire Team is Managing Customer Satisfaction

It's a mistake to think that only the customer service department impacts customer happiness. Everyone on your team--from the accounting department to HR to sales--plays a role in making sure the customers are happy. Remind your staff of this frequently, and make sure all of them understand their role in boosting customer satisfaction in 2015.

5. Keep Employees Engaged

Keeping your employees engaged and inspired is the only way you can count on them to do the same for your customers. A recent Gallup study demonstrated that workgroups with higher levels of employee engagement had a higher number of highly satisfied and loyal customers. In the federal agency studied, this equated to $1 million in additional revenue. Never forget that your team is the heartbeat of your organization--and if they aren't happy, they won't give great service to your customers.

6. Build Key Performance Indicators (KPIs) Around Customer Satisfaction

One way to keep your team focused on your mission to make customers happy is to tie their goals to it in a tangible way. This can be done with "a stick"--that is, with punishment for poor results. However, you may find that your employees respond better to "a carrot," or a reward for meeting a customer satisfaction goal. Whether it's a financial bonus, a special parking place or some other treat, find a way to reward employees who have excellent customer satisfaction results. Doing so will encourage others to strive for greatness as well.

7. Follow Up on Customer Satisfaction Measures Often

If you identify issues from your customer calls, satisfaction surveys or online reviews that you want to address, take the time to follow up and make sure that customers are satisfied with the changes you've implemented as a result. Measuring and responding to the key drivers of customer satisfaction is an ongoing process, not a one-time event.

If you want to boost customer happiness in 2015, you'll have to take purposeful action. Determine how you want to measure customer satisfaction, be the expert, offer live chat, get your team on board and keep them engaged and accountable. In the end, remember that the pursuit of customer satisfaction is a process. As long as you implement a plan and stay the course, you should see consistent improvements in your brand's reputation.

How new KPIs are helping companies become more customer-centric

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According to Forrester Research, organisations in industries ranging from airlines to health insurance have the potential to gain hundreds of millions in revenue when they provide a better experience for their customers. This revenue is typically driven by increased purchases, reduced churn, and improved word of mouth promotion.

To truly engage with customers and reap the full rewards of a customer-centric focus, however, companies need to build a deep understanding of their customers' journeys across all touchpoints.

Today, many organisations are exploring more sophisticated ways to build that level of understanding to provide consistent, contextual and personalised experiences - no matter which channels customers use to engage with their brand. It has become imperative for organisations to consider end-to-end approaches to collecting, analysing, and utilising customer data across all channels.

To that end, the following new key performance indicators (KPIs) are helping organisations shift the paradigm to view interactions from the customer's perspective rather than the company's, resulting in a much better understanding of customer needs and engagement:

• Customer effort score looks at making the overall customer experience as effortless as possible. Customers dislike having to contact an organisation multiple times to resolve an issue, having to repeat information, or having to be transferred from one agent to another. Organisations are analysing both structured and unstructured data mined across multiple channels - including phone and branch interactions, emails, chat sessions, and social postings - to determine how easy or difficult it is for customers to interact with them.
• First contact resolution is an important element in the customer effort score. This metric has evolved from a single-siloed measurement to an omnichannelmeasurement. This is done by trying to map the end-to-end journey customers experience across channels to achieve full resolution. For example, speech analyticscan help analyse phone interactions to identify when a customer says he/she was promised something in a previous conversation or has tried communicating via other channels. This would then be tagged as a repeat contact journey, even if it may be the customer's first phone call or a call that is beyond the time window associated with traditional first contact resolution.
• Customer health score examines how a customer might rate an organisation and allows a business to use the information to pinpoint loyal and content customers who might want to increase their purchases - and even help promote the brand. The score also helps to identify unhappy customers who need more personalised attention from agents to prevent them from churning or becoming brand detractors. The customer health score and relevant personalised suggestions should be presented to the agent every time she serves the customer. Armed with this information, agents are better equipped to handle customer interactions in a personalised and contextual way - which also helps to achieve true customer engagement.

An effective way to meet consumer demand for personalised service and a positive customer experience is to utilise these detailed metrics in tandem with customer journey mapping to create a clear view into the customer relationship lifecycle. By being able to create an illustration of this lifecycle, employees across departments gain a much deeper understanding of the customer experience. They are primed to influence and optimise customer engagement and, if need be, change existing processes and procedures.

A customer journey map is a visual representation of the end-to-end service journey of a customer, including customer expectations before the first encounter. It shows the customer perspective from the beginning, middle, and end as they engage in different services and departments to achieve their goal. This helps to illustrate the range of tangible and quantitative interactions, triggers, and touch points, as well as the intangible and qualitative motivations, frustrations and meanings.

Creating a customer journey map is one of the most effective methods for understanding how customers interact with companies, whether they are satisfied or dissatisfied (including ways to address specific areas of dissatisfaction). It typically involves interviews within the organisation and customers, as well as customer-facing employees across all business areas, to get a full perspective of all the customer touchpoints.

As a way to augment customer journey mapping strategies, organisations can now employ more dynamic customer journey mapping solutions by leveraging new analytics platforms to capture, analyse and correlate customer interactions, behaviours and journeys across all channels. These new engagement analytics platforms allow for real-time information to reflect the inevitable changes in customer interactions and behaviours. Because customers use so many communication channels - often simultaneously - organisations need a single view of the customer journey, pinpointing areas of opportunity and deficiency, and developing actionable strategies to address them.

Dynamic dashboards, advanced data visualisation tools and sophisticated engagement analytics capabilities are now helping leading organisations to truly understand and affect the end-to-end customer journey. But these insights need to be applied and used by employees who interact with customers as well as back-office employees, who sometimes have a huge impact on these interactions as well. This emerging new space is called 'customer engagement optimisation', which combines advanced analytics capabilities with engagement management solutions that include unified agent desktop powered by contextual knowledge management for the front and back office, as well as optimised self-service solutions that are constantly fed by analytics insights.

Customer engagement is high on the priority list of senior executives because of the quantifiable links among customer experience, loyalty and revenue. The most successful organisations are adapting metrics and processes to reflect a more personalised customer-centric perspective. For organisations seeking to optimise customer engagement, ongoing assessment and evaluation and a willingness to update traditional metrics and business processes can provide a clearer picture of how to engage customers on their own terms, which ultimately benefits customers and company alike.

Daniel Ziv is vice president of customer analytics at Verint.

Up Next: The Greatest Era of Entrepreneurship and Small Business The World Has Ever Seen

BY THOMAS KOULOPOULOS

 

Founder, Delphi Group

Six game-changing forces are driving a new era of entrepreneurship and opportunity globally. How many of them are you tapping into?

There's a raging debate about the future of small business. On one side is a mountain of data that indicates entrepreneurship is slowing. On the other side is the rising sentiment that it's easier than ever to start a new business, whether you're a 13-year-old sneaker-head or a 65-year-old consultant.

Part of the problem is that many of the metrics we rely on to plot the future of small business are simply misleading. For example, one stat used to justify the decline of small business is that the number of startups as a percentage of total businesses has fallen from 15% in 1978 to 8% in 2012. But that's in large part because the total number of businesses has nearly doubled over the same period.

"Part of the problem is that many of the metrics we rely on to plot the future of small business are simply misleading."

A bigger part of the problem is that we are simply looking in the wrong place. Sort of like the fellow who dropped his wallet on a dark sidewalk and then walked back two blocks to look for it under the last street lamp he passed because that's where the light was!

In this same way we are looking at small business and entrepreneurship through the lens of the past, without factoring in six game-changers that are going to spur what I believe will be the greatest era of innovation and entrepreneurship the world has ever seen.

Game Changer #1--Micro-Entrepreneurs

Starting a business is not for the faint of heart. But what if you could remove the risk from the vast majority of new business ventures?

That's exactly what's happening with what are being called micro-entrepreneurshipmarketplaces. Some of the earliest and most obvious of these are Ebay, Amazon, and Etsy. While getting exact numbers on the size of these marketplaces is difficult and requires a bit of speculation, it's safe to assume that over 1,000,000 people use Ebay as their primary or secondary source of income, there are about the same number of shops on Etsy, and Amazon has over 2,000,000 marketplace sellers. Over 90% of all these sellers are sole proprietors who do not show up in any statistics about small businesses, employment, payroll, or entrepreneurship.

"...the potential represented by micro-entrepreneurism--already as high as 10% of the US workforce--is not tracked in any meaningful way."

In addition there are nearly 100 other micro-marketplaces in existence today where people earn all or part of their income. Some of the most popular are Amazon's Mechanical Turk, Crowdflower, Innocentive, Elance, and oDesk, which collectively include about 10,000,000 participants.

And then you have the micro-entreprenuers who are involved in Uber, Lyft, Airbnb, Instacart, TaskRabbit, Homejoy, and others; they add another 1,000,000 to the ranks of micro-entrepreneurship.

And yet the potential represented by micro-entrepreneurism (which could already be as high as 15,000,000 people or about 10% of the US workforce) is not tracked in any meaningful way. They are not employees, nor are they running a business, at least not in the traditional sense.

So, what impact will this new breed of micro-entrepreneur have on the economy? Well, consider that franchising, one of the great game changers for small business over the course of the last century, today accounts for over $1 trillion in total sales and employs approximately 15% of the US workforce. My sense is that micro-entrepreneurs will far exceed that sort of scale and economic contribution in just the next five to ten years.

Game Changer #2--The Renaissance of Manufacturing

In our book, The Gen Z Effect, my co-author Dan Keldsen and I talk about how 3D printing is creating an entirely new model for hacking the high cost of manufacturing and creating a manufacturing renaissance for entrepreneurs. With 3D printing the time and cost of prototyping, testing, and market adoption drops dramatically, as does the cost of the final product. One of my favorite examples is Easton LaChappelle, a teen who used 3D printing to not only build prosthetic arms that can be sold for a few hundred dollars, as opposed to traditional prosthetics that can cost upwards of $50,000, but also made his 3D design and engineering plans available as open source! 3D printing opens up manufacturing to just about anyone who has access to the Internet. Easton is not only creating value for himself but he is also creating a platform for value creation that ends up being an entrepreneurship multiplier.

Game Changer #3--The Hidden Billions

A staggering 500,000 new businesses are started each month in the USA alone. While only 30 percent of those businesses have more than one employee and less than 20 percent will survive their first year, that still leaves just about three million new businesses each year that are bootstrapping without any outside funding. Not all are destined to become the next Google or Facebook, but if only one percent even come close, that's still thirty thousand businesses that have a good idea and do not have access to outside capital--seven times as many as do get funding!

"within ten years the amount of money flowing through all crowdfunding platforms will at least equal that of all other funding sources."

That's an enormous amount of potential opportunity left on the table. Just to put it into perspective. Estimates from the National Venture Capital Association put the contribution of VC at about 10% of US GDP. While the math is fuzzy, we could claim that GDP would increase by as much as 70% if seven times as many businesses were able to get funding!

What will fuel these businesses is crowdfunding, through platforms such as Kickstarter, Indiegogo, Bolstr, and RockThePost which to date have raised over $3 billion for businesses that would otherwise have no access to capital.

Crowdfunding may still represent under 5% of total funding from VC and angels but it's doubling year over year. I'd go so far as to project that within ten years the amount of money flowing through all crowdfunding platforms will at least equal that of all other funding sources.

Game Changer #4-- The No-Cost Failure

The entire risk profile of an entrepreneurial startup is changing radically. In the Graduate classes I teach,my students have increasingly been voicing their expectations that they need to have started at least one if not several businesses. While they would all like to hit it big they are more concerned with the stigma of not having tried than with having tried and failed. In research we did for The Gen Z Effect we found that 50% of Gen Z (born after 1995) expect to start their own business.

"...50% of Gen Z expect to start their own business."

The reality is that with the availability of micro-entrepreneur platforms, free or near-free services in the cloud, and crowdfunding options, the down side of starting a new business is approaching zero. Experimentation is all but free. All that you are investing is your time. Think about it. If I were to take you to a casino, sit you down at a roulette wheel and let you place your bet with free chips, which would pay off in real money if you won, would there be any reason not to place the bet? Yeah, now you're getting it.

Game Changer #5--The Third Act Entrepreneur

It's been said that boomers have been the most entrepreneurial generation. Yet, the vast majority have worked in a traditional organization and haven't started their own business--not yet anyway. As Boomers become Zoomers (A moniker meant to describe their continued momentum past the 65 year mark--and one I personally love since I'm smack in the midst of that cohort!) many of them are struggling with the notion of retirement.

"...retirement is a construct of the past, when attachment to a physical workplace defined the degree to which you could remain in the workforce."

By 2030 there will be more than 70 million people in the US 65 years old and over, double the size of that same demographic in 2000. In addition number of employed workers over 55 has risen by 50% over the past decade as boomers move through the workforce! The bottom line is that retirement is a construct of the past, when attachment to a physical workplace defined the degree to which you could remain in the workforce.

By the way, shunning retirement is not just an economic issue. Most of the boomers I talk to are well off. It's not about the money. There is something even more important at play. Simply put, they really are the first generation to have the choice to remain intellectually and economically engaged as much or as little as they want for the rest of their lives.

Game Changer #6-- The Other 5 billion

The final factor that we seem to consistently dismiss is the one that will amplify everything else I've already talked about, it's the Internet on-boarding of the world's population. Today we can generously estimate that about 2 billion people have regular access to the Internet. Over the course of the next 10 years we will see the affordability and the mobility of the Internet reach a point where every person on the planet has the ability to not only access the vast stores of information but more importantly educate themselves and then contribute to a global network of commerce. The easiest route to do that with the least amount of economic friction will be entrepreneurship

Opportunities Multiply

Economist Paul Romer once said to me, "we fail to appreciate the magnitude of change because opportunities do not add up, they multiply." That is definitely the case when it comes to the future of entrepreneurship and small business.

"we fail to appreciate the magnitude of change because opportunities do not add up, they multiply."

There's no doubt that ignoring these six game-changers means that you'll miss out on the opportunities that lie ahead, but take heart; standing under that streetlamp will give you the best view of each one as they pass you by.

The Skills That Make Entrepreneurs Extraordinary

An author finds what it takes to be a successful entrepreneur

April 9, 2015|by Eilene Zimmerman

Five years ago, Amy Wilkinson was attending a birthday party in New York City when she looked around at the prominent guests and saw several well-known entrepreneurs. They included the founders of Google, eBay, and Gilt Groupe.

That got Wilkinson, a fellow in the White House Trade Office at the time, thinking. She wondered what had made these entrepreneurs successful when so many others had failed. “I decided to study the most successful entrepreneurs to figure out what skills they had in common,” says Wilkinson, a lecturer at Stanford Graduate School of Business. Thus began her research odyssey: 200 interviews with leading entrepreneurs, including the founders of LinkedIn, Spanx, Chipotle, and Airbnb.

After analyzing nearly 10,000 pages of interview transcripts, more than 5,000 pieces of archival and documentary evidence, and some 4,000 pages of academic research, Wilkinson teased out six skills shared by the most successful entrepreneurs and wrote a book about them. Wilkinson says extraordinary entrepreneurs are “creators” who aren’t necessarily born with an ability to build and scale companies successfully. They work hard and exploit these six skills:

Find the Gap

Steve Ellis wanted to create a Mexican fast-food restaurant that was, at the same time, the antithesis of fast food: made-to-order with high-quality ingredients. In founding Chipotle in 1993, he also created a new dining category —fast casual. This ability to see opportunities and unmet needs that others don’t and then find innovative ways to fill them is what innovative enterprises do, Wilkinson says.

Drive for Daylight

In the same way race car drivers keep their eyes fixed on the road ahead while seeking opportunities to pass a competitor, successful entrepreneurs focus on the future, unconcerned about the constraints of their “lane” or the position of their competitors. Chobani yogurt founder Hamdi Ulukaya, for example, took his company from zero to $1 billion in annual revenue in five years by making decisions with an eye toward the future. That included buying and rehabbing a decaying yogurt plant despite having only a few thousand dollars of available cash. Today, Chobani Greek yogurt sales are about half of all yogurt sales nationwide.

This framework for rapid decision-making was created by a U.S. Air Force fighter pilot during the Korean War, but it can help entrepreneurs too.

Fly the OODA Loop

An acronym for “observe, orient, decide, and act,” this framework for rapid decision-making in fast-changing environments was created by Col. John Boyd, a U.S. Air Force fighter pilot, during the Korean War. For entrepreneurs, Wilkinson says, this means continually updating their assumptions and moving quickly from one decision and iteration to the next. David Sacks, PayPal’s first COO, told Wilkinson that PayPal’s team would look at new features that competitors were building and quickly iterate. When Dotbank.com, for example, gave a $10 bonus to those who signed friends up for its service, PayPal rolled out a similar offer within a week, and added a $10 bonus for the new customer, too.

Fail Wisely

“There’s a lot of hero worship in startup circles,” Wilkinson says, “but they’ve all failed. Every single person I met with talked about failure.”

Successful entrepreneurs understand the key to avoiding more catastrophic mistakes is to make a series of smaller errors. They test ideas in low-risk environments as an inexpensive way of gathering insights to determine whether a product or idea will take off. Some concepts work and some don’t, but in either case, the results make creators smarter and more resilient, says Wilkinson.

Network Minds

Entrepreneurial success, says Wilkinson, involves solving multifaceted problems with the help of a diverse group of thinkers. They build on each other’s ideas to overcome the problems that arise in growing their businesses.

Gift Small Goods

These people are building new things and solving new problems all the time.

Amy Wilkinson

Whether it’s forwarding a résumé, writing a few lines of code, passing an opportunity on to a colleague, or critiquing a proposal, giving brings rewards. Wilkinson says entrepreneurs who build positive relationships by looking for ways to provide help gain a competitive advantage. “This was a surprise to me,” she says. “It’s the result of the rapid transmission of information, especially through social networks, so our reputations are 100% known. That forces better behavior.”

Wilkinson was also surprised to find the most successful entrepreneurs are not comfortable in their success but instead keep striving. The most successful entrepreneurs tune out naysayers. “These people are building new things and solving new problems all the time,” she says. “They have had to learn to get comfortable with being uncomfortable.”