Archive for April, 2013|Monthly archive page

Cross sell to grow

In a low growth economy, many companies understand that one of the best way to grow revenues is by selling more goods and services to existing customers.  At the core of this strategy is ‘customer focus’ – providing better solutions to satisfy more customer needs.   Yet, this easier said than done. A variety of factors can combine to scuttle the best designed plans.  Managers can overcome these barriers and be ‘cross sell ready’ by optimizing their organization structure, product portfolio and incentive schemes.

A corporate buzzword for the past decade, CF is a simple idea:  understanding and targeting a customer’s full gamut of needs will enable the delivery of solution value, therefore catalyzing the cross selling of other products. Our clients that have gotten CF right have generated millions of dollars in profitable, new revenue along with higher customer satisfaction scores and lower marketing costs. Though each firm had a unique CF strategy, they all share three important characteristics:  a deep understanding of customer needs across a purchase life cycle; a shift from selling products to marketing solutions and; a focus on relationships versus transactions.

Despite a compelling premise, increasing cross-selling rates is not a slam dunk.  There can be multiple organizational barriers to better performance.  For example, most firms are organized in product, geographic or functional silos making information sharing, collaboration, and joint selling very difficult.  These silos often extend down to the IT systems, restricting visibility into a client’s sales history and requirements. Secondly, compensation schemes and metrics often do not support cross selling versus other goals like client acquisition.  Finally, the culture in many organizations is a barrier to implementing a CF mandate, collaborating or cross selling.

Our consulting experience suggests that the difference between leading cross sellers and under-performers comes down to who can get the 3Cs of organizational alchemy right:

Capabilities

Customer-focused firms have deep knowledgeable of their customers and the capabilities to enable them.  Len Lyons, General Manager of Workplace Medical Corporation a leading occupational health service company, asserts: “We demonstrate to our clients that we’re experts in our field and in theirs. People maintain strong loyalty to someone they trust and for us, this has had the added benefit of significant growth through customer referrals.”   Companies with a strong CF have well-developed people, technology and marketing competencies.  Their workforce features a large coterie of generalist, and team-driven problem solvers who can interact directly with the customer.  Formal corporate education programs and defined career paths cultivate and reinforce these vital individual traits.  Moreover, these firms will have: an advanced CRM and data management systems that deliver a comprehensive view of each customer and prospect’s buying behavior; a long term, relationship-inspired sales approach and; product and R&D teams that are connected directly with buyers and users.

Cooperation

Being internally cooperative (as well as with channel and supply chain partners) is critical to aligning around customer needs and deploying maximum capabilities.  Workplace Medical implemented this shift in two steps.  Says Lyons, “first, we systematically recalibrated our entire organization and marketing strategy from a transaction focus to a solution-driven model. Then, we led our clients through a paradigm shift in the way they perceive the nature and value of our service.”

Customer-focused enterprises encourage and reward cooperation across the organization.  For example, they foster accountability by having all team members measured against key performance indicators like customer satisfaction and cross selling rates.  And, they subordinate departmental metrics to larger, more customer-centric measures.  However, achieving higher levels of cooperation and information sharing will be problematic in low-trust cultures. Many firms will need to undertake change management initiatives to get recalcitrant or skeptical employees (particularly disinclined sales people) to go along.

Coordination

Maximizing cross selling activities requires internal departments as well as channel partners to be strategically and tactically aligned.  High levels of coordination – enabled through supporting technology, regular communication and processes – are needed to share information, efficiently deploy resources and solve multi-faceted customer problems. One way customer-focused companies achieve this is by putting sufficient authority in the hands of an ‘owner’ who is closest to the customer or segment’s requirements – and opportunities. In some of our clients, the leaders needed to dismantle their siloed department-based structures and replace them with multi-functional, autonomous customer-based teams.

Improving a firm’s organizational model to deliver high cross selling rates is not for the impatient or clumsy.  It is part culture change, process redesign and incentive re-engineering.  Furthermore, cross selling efforts need to be consistent with the company’s value proposition and brand image, not to mention the best interests of the client.   Managers should expect to spend at least six months transitioning to a new model while they work through hiccups.   Though the process is time consuming, the rewards are undeniable.

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

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Innovation from left field

Most companies are on the hunt for breakthrough ideas and technologies that will enable them to leapfrog competition. Increasingly, the big innovations are found outside of their existing products’ or technologies’ domains.  Usually this is a result of serendipity but it doesn’t have to be. New research out of Wharton Business School (published in the Knowledge@Wharton newsletter) outlines how creative problem-solving techniques can be used to bring new innovation to products and service categories.

There are many examples of innovation that have seemingly come out of left field.  Semiconductor firm Qualcomm’s unique colour display technology is rooted in the microstructures of the Morpho butterfly’s wings.  The cushioning in Reebok’s best-selling basketball shoe is based on technology borrowed from intravenous fluid bags. Design firm, IDEO, leveraged technology from a shampoo bottle top to create a leak-proof water bottle.   How can other firms efficiently find and exploit innovation from the outside?

Wharton management professor, Martine Haas and doctoral student Wendy Ham, studied how to harness ideas from the “periphery”.  Their conclusion — supported by our client work — is that there are two ways to bring in peripheral knowledge to advance breakthrough innovation: Idea transplantation and perspective shifting.

Idea transplantation is the leveraging of technologies or practices from outlying areas into core product domains, with or without some modification. This is what IDEO and Reebok did.   Perspective shifting occurs when a R&D team’s know-how or experience in a tangential area leads them see a problem in their core category differently, thus revealing new solutions.  The researchers cite the example of Israeli entrepreneur Shai Agassi and his mission to commercialize electric cars.  Agassi borrowed the concept of contract-based leasing from the mobile phone industry and applied it to battery purchasing and consumption, one of the barriers to consumer acceptance.

Both idea transplantation and perspective shifting rely on individuals paying attention to and filtering seemingly irrelevant information in a systematic fashion. This can be a time consuming task fraught with many false starts and dead ends.  Some of the challenges include information overload, not choosing enough peripheral domains to study, and neglecting the importance of idea filtering criteria.

As with other complex undertakings, using a disciplined analytical framework can help improve the chances of success.   The authors along with our innovation generation model recommends a number of strategies including:

Consider multiple external domains

Initially, there is often no way of knowing whether one external domain will yield breakthrough innovation.  The odds of success improve when the team considers a range of peripheral areas and where these might be compatible with the current technology set.

Naturally, companies that already compete in different product categories will be at an advantage (although internal silos may scuttle this advantage).  For single-domain firms, managers should look outside through open innovation strategies and regularly engage in collaborative outreach.  A word of caution:  studying too many peripheral areas can result in diminishing returns.

Focus matters

Since exploring new domains is not easy, companies can maximize the effectiveness of the effort by increasing organizational and individual focus like adding more people, raising the percentage of the day focused on key domains, and lengthening the mandate.

Yet, sustaining this focus can be a challenge.  Firms need to ensure their R&D initiatives have the appropriate internal priority and time to conduct a proper assessment.  Furthermore, managers can institutionalize  “patience” by tweaking management schemes.  Still, being focused is not a sufficient condition by itself.

Dabble outside

The Wharton study reinforces the problem-solving and brainstorming value of taking breaks and engaging in outside activities (like a hobby or project) while undertaking innovation-oriented work.  However, it is unclear how much outside activity is too much or too little to stimulate the identification of peripheral innovation. The research suggests that breakthrough innovation will be more quickly generated by input from seemingly irrelevant areas, such as creative industries, product design or entrepreneurship” – as opposed to fields that have “rigid problem-solving paths,” like engineering or accounting.

Some of the innovative companies we work are successful at bringing outside creativity in.  They maintain a variety of policies including deliberately looking for hires outside of their industry or technical domain; encouraging employees to pursue outside interests during company time, and teaching creativity and problem solving skills as part of corporate training.

At the end of the day, you often don’t know where the big idea will come from.  Firms that can be optimistic, patient and deliberate in their approach will maximize their odds of success. They should also be mindful that tapping peripheral innovation is as much about the journey as the outcome.

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

Filling middle manager skills gaps

Much has been written about our country’s pervasive skills gap:  the gulf between the existing and growing need for skilled and technical labour and our economy’s chronically high unemployment. Less advertised but equally as important is the skills gap within a major segment of our workforce — middle managers.  For many growth-focused firms this middle manager gap is a barrier to higher productivity, increased innovation, and faster execution.   Companies that can address these shortfalls with new educational approaches and tactics can dramatically improve their chances of long-term success.

Low-level skills shortages are not the only human-capital issue plaguing employers.  Skills deficiencies among middle managers — those white-collar, knowledge workers — is a significant and hidden drag on organizational performance. While hard, economic data on this problem is difficult to find, anecdotal feedback from dozens of firms is worrisome.   The knowledge gap ranges from basic skills to advanced thinking.  If workers are under the age of 40, there is a good chance they  lack essential writing, presentation and quantitative skills (e.g., basic statistics, finance).  Beyond these core skills, many middle managers have difficulty with important activities like synthesizing disparate pieces of information, undertaking financial modelling or structuring a business case.  Moreover, talent deficiencies are not limited to analytics or communicating.  Project execution and collaboration competencies are also in short supply.

The scale and needs of the middle manager layer amplifies cost and compromises outputs (productivity and thinking).  Because middle managers are numerous and expensive, their skills deficiencies will have a large and negative impact on financial and operational performance. Moreover, talent shortfalls hinder middle managers from problem solving, fostering innovation, and leading change, three critical ingredients for dynamic and globally oriented enterprises.

This issue is expected to get worse.  “The pressure on middle managers to perform is only going to increase due to population demographics,” according to David Maddocks, president of WorkSmart Education, a provider of eLearning programs to banks.  “Organizations are facing a huge loss in institutional knowledge with baby boomers retiring, and there are fewer entry-level employees coming into the workforce.  This means the talent pool will shrink, forcing labour costs higher.”  Furthermore, the talent gulf may not be easy to close.  The kinds of skills needed by employers have changed from incremental new ones that can easily be learned on the job to those that require advanced technical and “soft” skills (in problem solving, communication, teamwork, and leadership, etc.) which cannot easily be learned in a workplace.

In the short-term, filling the gap will remain the responsibility of employers.  Sending more people for MBAs won’t solve this problem, so what can companies do?

Understand the problem

Leadership needs to grasp what and where the talent gaps are, and why they occur.  In large companies, this is an onerous task.  The analytical process should be focused towards more manageable lines of business, divisions or departments.  Talent assessments should be holistic if possible, based on existing performance appraisal processes, benchmarking and online tests.

Address strategically

Training can no longer be approached in an ad hoc fashion driven by employee desires.  Firms need to prioritize education according to business needs and make ongoing skill development a part of career building.  These initiatives should focus on offering workers career pathways, not just skills for the initial job. This life cycle approach can begin with running internships or cooperative degree programs for university or college grads.  This “try before we buy” approach allows many employers to assess the skills, work ethic, and attitudes of prospective workers and to give them training tailored to a firm’s specific needs.  Furthermore, companies can optimize their talent-management strategies by tweaking their hiring practices (to focus more on capabilities) and through better retention strategies that minimize turnover of the most skilled managers.

Rethink education

Organizations need no longer rely on vanilla, push-based training methods.  New and improved educational programs combine cutting-edge content, experiential learning tools and ongoing measurement.  Online and classroom education can be integrated with opportunities to apply new concepts and skills in actual or simulated work settings — an approach proven to be the way adults learn best.  “What gets measured gets done, and its no different with education” says Maddocks, “Companies must make education a priority by holding each layer of management responsible for its connection to the business and successful implementation. As well, each layer has to get better at coaching the layer below it for results.”

Finally, expert and holistic knowledge is now a mouse-click away.  A variety of third-party educational providers assemble the expertise of leading schools like Harvard, Stanford, and Princeton to develop online courses as well as web-based certificate programs.  And, our firm mines consulting learnings from dozens of companies to create unique, cross-discipline programs in strategic thinking, change management and ‘executing with excellence.’

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


Gamification 101

Over the past year, our firm has received more calls on Gamification than any other new business topic.  Two client questions stand out: What is Gamification? And, what problems does it solve? When answering, I begin with a tale of two employees, Mary and Greg.

Mary is one of thousands of disengaged employees working in a typical call centre.  Her year-old job is lonely and repetitive with little autonomy or creativity. Mary’s daily tasks have become so routine and measured that she vacillates between boredom and fear. Although she is supposed to receive quarterly performance reviews, her boss spends most of his time recruiting and fighting fires. Senior management regularly mandates her department to implement process redesign and change initiatives, many of which are divorced from what really goes on in her job. Most likely, Mary is monitoring online job postings, a prudent strategy given that the COO regularly muses openly about outsourcing her function.  The chances of Mary staying another 12 months are only 50%.

Ten months ago, Greg was fortunate to get a call centre job call in a firm employing gamification principles and technologies. Greg can’t wait to start his day by logging into his firm’s “gamified” workflow management system.  The first thing he sees is an Avatar — a virtual and personalized representation of himself.  His Avatar acts on his behalf, taking customer calls, going to meetings with other Avatars and updating his skills. Information about his team’s progress is fed to Greg in real time, including critical customer issues and company social outings.  Instead of the usual call centre metrics, Greg competes with his colleagues for badges and ranks.  Moreover, he accumulates a virtual currency (that can be exchanged for special perks) when he distributes best practices and assists co-workers with problem solving.  A combination of game-enabled fun, friendly competition and subtle peer pressure has helped Greg become a fully engaged employee.  Not surprisingly, he has developed new leadership, communication and collaboration skills that put him on track for a promotion.

The first story is illustrative of many companies.  The second tale is fictitious but will soon be commonplace. Firms as diverse as Adobe, Whole Foods, Nike, Microsoft and Duane Reade are using games to transform routine and mundane tasks into more useful, fun and financially rewarding activities. The business outcomes are compelling: improved consumer loyalty, increased employee engagement and higher levels of collaboration & information flows.

Gamification is hot.  According to a 2011 Gartner Report, more than 70% of Global 2000 organizations will have at least one gamified application by 2014. Even if you square root these numbers, Gamification is destined to be the next big thing.

Gamification defined
The most common definition is the use of on and offline game principles, techniques and technologies in an organizational context to improve business results. At their core, Gamification programs use stories, missions, incentives, and real-time feedback to change a person’s behavior over the long term. Stories can be anything that captivates and catalyzes a person’s interest over an extended period. Incentives can range from simple leaderboards, ranks and badges to the creation of virtual currencies that can be traded.

Problems solved
Gamification has been used in a variety of applications, including:

  • Improving operational productivity – Microsoft uses team-based competition and leaderboards to more quickly and thoroughly find software bugs.
  • Driving consumer awareness and engagement – Duane Reade uses location-based, competitive gaming to build awareness of their stores and merchandise selection.
  • Deepening product usage – Adobe has gamified their Photoshop tutorial to improve a trial user’s knowledge of core functionality.
  • Facilitating employee learning and participation – Deloitte uses Gamification to better address employee concerns and manage performance in areas like training, document creation and community engagement.
  • Increasing employee engagement – One of our pharma clients used a game to better align around corporate goals, teach workflows and promote cross department collaboration.
  • Triggering lifestyle changes – The Nike+ game promotes exercise by allowing people to track their results and compete against their friends and others.

Four pillars
Winning Gamification strategies artfully combine four elements:

  1. Business strategy – Powerful Gamification programs are tightly coupled to core business strategies and metrics
  2. Motivational science – Successful games leverage key precepts of behavioral and social psychology such as the importance of continuous feedback, competition and public recognition.
  3. Video game learnings – Popular video games have been shown to increase brain endorphins, which lead to higher levels of blissful happiness.
  4. Collaborative technology – A variety of companies like Bunchball and Salesforce.com have deployed enterprise-level Gamification platforms that can run different games

Both consumers and employees just want to have fun. Indulging them is becoming a sure path to business results (when the Gamification program is properly designed).  Ensuring this happens will be the subject of the next Gamification column.

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