Archive for September, 2012|Monthly archive page

Social media best practices

Most firms are expected to significantly increase their spending on social media over the next 18 months.   However, managers need to ask themselves if they have the capabilities to exploit its potential?  Our experience and industry research suggests that many companies are ill-prepared to leverage social media.  They will first need to optimize their organizations and then get three best practices right.

Social media is clearly near the top of the corporate agenda.  According to a 2011 Booz & Co. and Buddy Media survey of 117 companies, 40% of CEOs reported that they will be increasing social media’s priority within their firm. About 95% of the respondents indicated that they will invest more in social media.  To efficiently and effectively scale up this investment, firms must make certain they have the right organizational design and the requisite capabilities, including the ideal combination of people, skills and technology.

Given its relative newness, social media’s place in many companies’ structure, workflow and culture is unclear.  As a result, the first step for any CEO is to communicate down through the organization why social media is a strategic priority and how it supports key corporate priorities like new business acquisition, customer satisfaction and project execution.  Secondly, the CEO must ensure that all functional groups and business units are aligned to this mandate and provide the necessary input and support.  To guarantee brand consistency and integration, CEOs should make certain that the marketing function has clear responsibility and accountability for all social media efforts and budgets.

Once their organizations are optimized, firms must build and excel at three foundational competencies:  1) content creation 2) community management and 3) audience analytics.

Content Creation

The unique format and culture of each social media platform – think Twitter’s 140 character limit – requires a completely new kind of creative execution and campaign development. Compelling content is social by nature, unique and relevant to the community.  It incites engagement (i.e. having conversations, sharing stories) and is always focused against the brand strategy and key marketing metrics.

To deliver this, firms need to cultivate and attract ‘social creators’ with strong writing, editorial and listening skills.  Prudent firms are already bulking up.   According to the survey, 49% already have internal creative talent while 35% are building their bench.  Of those planning to hire, 72% are prioritizing creative talent (producers and editors) above other requirements.  To ensure that their content is fresh and innovative, companies should regularly engage with creative outsiders.  Given content’s vital role, it would not be surprising to see flourishing social media practitioners evolve as mini-publishers of different types of content and innovative tools.

Community management

Developing great content for your brand followers is just the beginning.  Companies need to cultivate these fans by effectively managing them ‘24/7’ within a community across multiple social media and offline platforms. To do this, firms need to excel at listening to their followers, overseeing their actions, rewarding their brand-reinforcing behaviors, and bringing new content and tools quickly to their attention.  However, this can be a challenge, requiring the skills of unique individuals and teams who wear many hats – part social media connoisseur, part brand champion and part analytics expert.

Some firms, like Microsoft, already get this.  “Our strategy,” says Grad Conn, chief marketing officer at Microsoft U.S., “is to evolve from ‘social marketing’ which simply pushes a message through social networks to a ‘social business’ approach where we use social networks to build relationships and foster conversations with our audience through listening engagement.”  Managers recognize this internal gap.  Approximately 50% of the survey respondents indicated that insufficient community management capabilities represent a barrier to social media success.  Importantly, 55% of respondents worry that they will lose control of their brand messages in a dynamic social media environment.

Audience analytics

There is no point in bolstering your content and community capabilities if you can not evaluate the results and course correct quickly.  At the most basic level, marketers must be able to measure the reach of their initiatives, for example, how many visitors, likes, comments and shares are they getting. Moving forward, managers need to understand the ‘why?’ behind the numbers.  For example, why does some content get shared over others?  Or, why do some communities participate more than others?

The real interesting insights come when firms can understand which fans or magnifiers (i.e. those that share content outside of the community) are strong brand advocates, and why they do that and influence others. Getting to these nuggets will require good qualitative and quantitative research competencies as well as social monitoring tools. Thats a focus area of Microsoft.  According to Conn, “Good content still rules, but now we know what’s good much faster as a result of social monitoring.”  Ideally, this analytical approach will lead to marketing’s Holy Grail – the determination of social media program ROI.

Social media has the potential to transform a company’s marketing effectiveness and its relationship with its customers, if management has the foresight, ability and fortitude to build out their capabilities.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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The end of Solution Selling?

Conventional wisdom says that solution selling is the most effective way to penetrate B2B customers.  Though this strategy is quite common, it no longer works all that well in many accounts, according to new thought leadership published in the Harvard Business Review. Sales managers would be wise to consider another approach that focuses more on engaging prospects differently and a lot earlier in the buying process.

With traditional solution selling, a sales representative seeks to link their solution with a customer need and expound why it is better than the competition’s. Good solution sellers’ focus on identifying customers with a burning need; elegantly positioning their solution against this need, and finally, finding a friendly advocate within the prospect who can champion the solution and help navigate the company.

End of an era?

There are two fundamental flaws with this approach. First, every firm practices it.  As a result, the sales experience can appear canned and insincere.  “What keeps you up at night” quickly rings hollow, possibly causing the sales rep to lose credibility and trust. Secondly, Solution Selling is no longer working. A Corporate Executive Board study of more than 1,400 B2B customers found that those customers undertook, on average, nearly 60% of the typical purchasing decision activities (e.g., researching solutions, ranking options, setting requirements, benchmarking pricing, etc.) before even having a conversation with a supplier.

Savvy companies are increasingly bypassing solution-selling sales reps.  For example, customers are using internal experts to diagnose their own needs and design solutions.  Furthermore, they are utilizing sophisticated procurement departments and third-party purchasing consultants to secure the best possible deals from suppliers.

Prescient sales leaders are recognizing the limitations of solution selling. “You can no longer rely on having built a superior ‘mousetrap’ to book a deal,” said David Linds, senior vice president, business development and relationship management at CIBC Mellon. “The solution gets you in the door and keeps you in the game, but the heavy lifting in the sales process is over by the time the RFP is out the door and in the hands of procurement. The critical work must have been done early on during the relationship building phase. The prospect must already know you, trust you and your firm, and in fact have already seen the solution in action. If the RFP is the first contact – forget it!”  Solution sellers may soon be a dying breed – unless they switch gears and become relevant again.

Retooling the approach

In their HBR article, “The End of Solution Sales,” authors Brent Adamson, Matthew Dixon, and Nicholas Toman contend that Insight Selling is a better way to sell.  Its effectiveness is backed up by CEB research of thousands of sales reps from hundreds of companies.   An Insight Selling strategy is a major departure from traditional sales approaches.  Some of its tactics include:

  • Target prospects with needs that are not yet defined (i.e. emerging demand) versus prospects with a clear understanding of their requirements and the competitive alternatives (i.e. established demand)
  • Engage a very different set of stakeholders, preferring skeptical change agents and internal mobilizers over friendly informants. A sales rep’s job is to help the mobilizers champion their vision.
  • Coach those change agents on how to buy, instead of quizzing them about their company’s purchasing processes.  Insight sellers will often seek to reframe the RFP to better compete versus addressing the RFP as is.

A number of companies are already using this new strategy. According to Harry France, a former country manager for HP, “Customers are searching for a consultative sales approach whereby the sales rep guides key constituents through the buying process based on an in-depth knowledge of existing business needs and previous successes with other customers. This personalized selling approach combines Solution Selling and the Insight Selling into a hybrid model where the client views the sales rep as their trusted advisor.”

Despite the research and anecdotes, one should be careful not to jettison solution selling so readily. Many purchasing decisions will continue to be made in advance, having nothing to do with the sales strategy employed.  Moreover, it is not evident that Insight Selling will be any more effective than Solution Selling in the long term given the advanced purchasing tools currently available to corporate buyers.

What is clear is that the times are a chang’in for Solution Selling, an approach that’s been around since the 1980s. This evolution – enabled by technology, analytics and buyer practices – will only accelerate with time.  Clearly, adaptive sales organizations who seek out prospects that are primed for change, who challenge them with provocative insights, and coach them on how to buy will be best positioned to maximize sales effectiveness.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Cut complexity, boost profits

Companies in industries as diverse as consumer and industrial products, banking, IT and telecom looking to sustain growth and reduce risk will naturally evolve towards a high degree of business complexity. The level of complexity will be directly correlated with the range of products and services offered, the intricacies of the operations, and the organizational structures deployed. Not surprisingly, complexity (both visible and hidden) come with an expensive price tag including unnecessary input, production, and selling costs as well as operational lethargy. Companies that can eliminate needless complexity and prevent its return will build margins, increase agility and improve resource allocation.

Cutting complexity is a significant enterprise-wide opportunity for organizations. Complexity reduction projects can produce more than $10-million in annual savings by eliminating labour redundancies, consolidating raw material inputs and optimizing supply chain networks. Moreover, indirect benefits such as higher productivity, fewer errors, and better employee engagement were forecasted to generate up to twice the amount of direct savings. The Boston Consulting Group estimates firms with the right strategies and cost transparency can realize a 25% to 100% increase in profit margins.

Excessive complexity is often found in organizations with the following traits:

A strong ‘customer is king’ mission

Many companies go overboard satisfying customers with little regard to the long-term organizational impact. Managers regularly offer new products, features and marketing programs to customers as specials or targeted against small niche segments. Inevitably, product proliferation occurs, and with it comes complexity challenges around inventory management, production scheduling, and sales efforts.

Matrix-intensive organizations

For many firms, a matrix structure is the default organizational model.  As these companies grow, so does the complexity especially when the structures and processes are poorly designed and implemented (e.g., overlapping roles & responsibilities, inadequate information flows, unclear decision rights). Complexity is manifested through process redundancy, increased conflict over mandate & priorities, and slower decision making.

Complicated supply chains

Most large firms maintain a large (often global) network of suppliers plugged into a convoluted supply chain. Managing this network is inherently difficult in the best of times. However, one small change in the external environment like adding a new supplier or connecting to a new IT system can dramatically increase operational complexity within the firm.

It should be pointed out that not all complexity is created equal. Clearly, some actions and choices are needed to reduce business risk, maintain core competitiveness and retain important clients.  However, problems arise when the revenue or value derived from these activities is far below the actual, enterprise-wide cost of delivering them. The management challenge is to separate the good complexity from the bad complexity and to deal with the bad. 

To do this, managers need visibility into the problem, some strategies for tackling complexity across the organization and the fortitude to prevent its return.

1.      Understand the problem

You can only fix what you can see. Conduct a product, department or company-wide review to comprehend the scope of the complexity problem. You could start by analyzing how each SKU within the product portfolio or extensive activity in a major value chain contributes to revenue, margin or enterprise-wide cost.

2.     Identify the culprits

Complexity follows the “80/20” rule – typically, 80% of complexity will trace to 20% of products or activities. The analytical challenge is to identify these 20% margin-killers, while safeguarding “good” complexity like strategic stock keeping units (SKUs) or prudent risk management activities.  Once the culprits are identified, managers should break them down into their component parts for analysis. For example, SKUs can be broken down into ingredient and packaging inputs. A value chain can be mapped into discrete processes, touches and approvals etc.

3.     Start Pruning

Once managers have the data, it’s time to reduce the logjam. Below are three common strategies for cutting complexity:

Consolidate and streamline

With products, look for opportunities to eliminate poorly performing SKUs and to consolidate the number of raw material and packaging inputs that go into the remaining portfolio. To reduce operational complexity, consider ways to minimize or remove unnecessary touches in areas like internal reviews, team & communication practices, and sub-optimal processes.

Bundle to increase standardization

Some companies have the ability to standardize complexity. For example, automotive and PC makers have been successful at combining dozens of product features, styles etc. into standard consumer bundles that could more readily be manufactured, inventoried and sold in volume.

Price for complexity

Some businesses must learn to live with certain complexity due to key client or regulatory demands.  In these situations, managers should look to recoup some of the cost of complexity by raising prices – and communicating these reasons to customers so as to manage churn.

Never going back

Pruning can often be the easy part. The bigger challenge might be ensuring the complexity doesn’t not return. Managers need to take steps like instituting disciplined product line management systems to make sure complexity does not creep back.

Although a strong customer focus, powerful supply chain or large product portfolio can differentiate a company, it can also burden it with undue complexity – much of it hidden and insidious.  Firms can unlock significant savings and accelerate the speed of their business by systematically tackling the complexity challenge.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

LEGO: Innovation gone bad

Conventional wisdom says that being more innovative is critical for enterprises looking to enhance competitiveness and improve financial performance.  However, the reality for many firms is very different.  An ill conceived innovation strategy or poor implementation of said strategy carries significant business risk.  Case in point is LEGO, the iconic 56 year old Danish manufacturer of educational toys.  The company’s innovation-induced brush with bankruptcy carries some poignant lessons for managers who see innovation as the magic bullet. 

A recent issue of the Knowledge@Wharton newsletter documents the LEGO saga. During the 1990s, the company faced a number of challenges including slowing market growth, mounting competition from lower cost Chinese manufacturers and changing customer needs – triggered in part by the rapid growth in electronics and themed toys.  To respond to these threats, management went on an innovation binge.  They added to an already large product portfolio LEGO-branded: interactive video games, jewelry, education centers, an amusement park, plus marketing alliances with the Harry Potter franchise and the Star Wars movies.

Around 2000, innovation became a strategic priority in the company. The firm became a best practice for fostering a culture of innovation. LEGO listened carefully to customer feedback. They proactively searched for unexploited markets where its brand could dominate. And, management actively recruited a diverse and creative staff and actively engaged a variety of external stakeholders. Overall, the goal was to become one the world’s strongest brand families by 2005

However, things did not turn out as expected.  Ironically, “LEGO followed all the advice of the experts,” says Wharton Professor David Robertson, “yet it almost went bankrupt.”  By 2003, the business was virtually out of cash. It lost $300M that year, and the projected loss for 2004 was up to $400M, with a bankruptcy looming in the not-to-distant future. Robertson would know:  he is the author of an upcoming book on the company’s innovation travails (Brick by Brick: How LEGO Reinvented Its Innovation System and Conquered the Toy Industry).  Below are some of the company’s missteps, based on Robertson’s research and our firm’s best practices:

Don’t bring a knife to a gun fight

LEGO’s innovation strategy was bound to fail.  The company underestimated the severity and permanence of the changes underway in their markets and with their consumers. As a result, the plethora of un-inspiring new products was unable to mitigate fundamental trade, consumer and cost challenges.  In many cases, it made the situation worse by bloating the product portfolio and reducing focus on core categories.  

Success is fleeting

Initially, many of LEGO’s innovations generated positive market results and customer feedback.   Problems arose when the myriad of products failed to hit their volume targets in the medium term, particularly the blockbuster-centric Harry Potter and Star Wars toys.  This unexpected ‘boom-bust’ performance led to inventory problems, an inflated cost base and added organizational complexity.

Know where you are going

In 2003, LEGO was enjoying early market success – but was flying blind and making decisions haphazardly.  The management had not addressed key questions needed to sustain profitable growth, such as:  What are our innovation goals and how will we get there?  Little attention was paid to how the large and expensive innovation effort fit into key corporate goals.  According to Robertson, “If you are going to accelerate innovation, you need to know which way you are going,” Robertson said.

Getting back on track

The strategic pivot came in late 2003. Importantly, LEGO did not jettison its innovative culture.  Instead, it learned from its failures.  The most valuable lesson was that a disciplined organization and management system was critical to guiding and supporting an innovative culture.  Going forward, the company created a more rigorous decision making process for evaluating and implementing its creative ideas.  For example, it developed a vetting process that required each new innovation to be financially sound and aligned with LEGO’s goal of being recognized as the best company for family products.

Furthermore, the firm abandoned its search for category-creating (but high risk) ‘blue ocean’ products.  Instead, LEGO reframed its innovation strategy.  They refocused their attention back to its core, large and well-understood markets. Recognizing the futility of competing on price and fighting with its retailers, the company attacked its competitors across multiple fronts by opening retail stores, creating LEGO-themed board games and straight-to-DVD films. 

The turnaround worked. By better managing its innovative tendencies, LEGO has grown to become world’s third largest manufacturer of play materials. Since 2009, sales have gone up an average of 24% annually and profits have grown 41%.

LEGO may no longer make the list of the most innovative companies, but it is moving forward at a time when many of its competitors are suffering. The LEGO story underscores the moral that leaders should be wary of blindly following innovation dogma. Robertson concludes, “Controlled innovation has clearly worked. That is the lesson learned at LEGO — just in time.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.