Archive for May, 2014|Monthly archive page

6 steps to transformation

To everything, turn, turn, turn.

There is a season, turn, turn, turn.

And a time to every purpose under heaven.

The Byrds

In today’s dynamic business environment, it is axiomatic that firms must in some part reinvent themselves to compete at a high level. Yet, this is easier said than done. Transformation is hard and as economists say, ‘there is no such a thing as a free lunch’. Fortunately, change agents can fall back on some battle tested lessons to improve their chances of success.

Many Canadian companies such as Target, Blackberry and Rogers are dealing with industry, customer, or technology challenges. These issues can range from battling a disruptive competitor or adapting to a zero growth market to trying to leverage the potential of digital technology or adjusting to new consumer behavior. Should they rise to the occasion, firms can ramp up competitiveness, boost profitability and enhance their brand image.

Genuinely transforming an organization’s core strategy, key activities or operating model is part art and part science – and loaded with risk. The challenge is akin to converting a car into a bus during a road trip: The car needs to adroitly mutate without breaking down or running off the road. The driver must be mindful of picking the right destination, taking the right route, choosing the right passengers and maintaining a vigorous but safe speed.

I have witnessed many successful transformations over the past 25 years. Though each case is different, winning companies tended to have strong Boards that empowered current or incoming CEOs to:

1.  Unify cross functional leadership around a new vision and change rationale, both of which were turned into a compelling narrative and an ambitious change plan;

2.  Quickly engage employees, suppliers and partners to build support for the new vision and roadmap;

3.  Test ‘sacred cow’ assumptions about what drives revenues, brand image, customers and costs;

4.  Make tough decisions around priorities, funding and resourcing, as they fit within the new vision;

5.  Go for quick wins that build on early momentum;

6.  Course correct the plans and activities when necessary.

The recent shake-up at Rogers is a good example (so far) of how to kick off a transformation. It is no secret that Rogers has had issues with poor customer service and rapidly changing market dynamics. A new CEO, Guy Laurence, was brought onboard in December 2013 to turn things around. At the outset, he spent a few months analyzing the entire business. One of the first things Laurence did was travel the country listening to employees, customers and partners about what ailed the company, the root causes of problems and where were the sources of growth. These learnings served as the foundation for a new customer-centered strategic vision focused on two go-to-market pillars – consumer and business – versus wireless, cable and media. Next, Laurence designed a simpler two-division structure that could drive both these pillars. Tough choices were (and will be) made around strategic priorities, staffing key positions, as well as defining new roles and responsibilities. Finally, Laurence is spending time communicating this plan down and across the company. Time will tell if his efforts bear fruit.

Yet, leaders should be mindful of hidden or unintended consequences during transitional periods. While a successful transformation can rejuvenate an organization, it can also hamstring a firm over the long-term. Risks are embedded in the financial and personnel trade offs that need to be made early in the change process. In particular:

Loss of talent

Inevitably, significant talent and institutional knowledge will be lost, the value of which is difficult to estimate early in the process. Rogers’ new structure eliminated the CMO position and replaced it with three smaller jobs. This decision left CMO John Boynton without an appropriate role and no job. Losing a wireless industry pioneer and seasoned marketer (#28 on Forbes’ list of the World’s Most influential CMOs) is never a good thing, potentially compromising long-term management depth and expertise. Having said that, Roger’s structural change is another firm’s gain.

Things get worse before they get better

Changes in structure, people and practices always bring hiccups. It takes time and money (e.g., you may need to invest IT) to execute with excellence, which you may not have when you need to deliver strong quarterly numbers. Furthermore, the confusion, strife or uncertainty around change efforts can lead to drops in employee engagement and brand image scores not to mention unintended employee and customer turnover. Not surprisingly, Laurence has acknowledged the potential for challenges over the next couple of quarters.

Change is inevitable. Leaders will improve the odds of transformation success if they follow best practices, stay the course and not ignore the potential ramifications of the decisions they make early in the process.

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

Getting gamification to work

When a new product is over-hyped, the likelihood of a backlash is high. So it goes with Gamification, a strategy used to accelerate business and employee performance. Gamification programs combine game mechanics, intrinsic rewards and social technologies in a business context to influence employee or consumer behaviour. Some recent studies, however, have called into question the effectiveness of using games to drive business results in every application. The key lesson from the research is not that Gamification is ineffective, but rather that managers need to focus on designing good games and ensuring employee buy-in up front.

A hiccup?

In 2011, research firm Gartner described Gamification as a “highly significant trend” in the business world. It predicted that by 2014, more than 70% of Global 2000 organizations would have at least one “gamified” application. Yet, a year later, the same firm decried that Gamification was being driven by “novelty and hype,” and predicted that by 2014, 80% of deployed gamified applications would fail to meet business objectives due to poor game design. Gartner’s scepticism was shared by other web experts [sic]. A 2012 Pew Research Center/Elon University survey of more than 1,000 Internet pundits and users showed a split jury on Gamification’s future: 53% of respondents believed it would take off (with some limits), while 42% said it would not evolve into a larger trend except in specific situations. Other studies have explored why Gamification may not be as effective as first imagined. A Wharton School of Business review looked at Gamification’s impact on employee attitudes and job performance at a technology startup. The authors, Nancy Rothbard and Ethan Mollick, found that people who consented to or embraced the game had good feelings about their job. Importantly, many studies link high work satisfaction with improved productivity, creativity and loyalty. However, those employees who did not consent to participating in the game ended up having negative feelings about their job. They objected to their employers imposing “mandatory fun.” With regards to job performance, consenting gamers did not improve their performance. And, among non-consenters, job performance actually declined slightly.

How a game was designed and implemented — in this case, securing the employee’s consent — had a major role in determining whether a program worked. Still, an aspersion of Gamification should be taken within certain context. Clearly, benefits and adoption rates were over-hyped a few years ago, even though more than 350 companies across multiple sectors have implemented these programs. Yes, there have been failures like at Google Reader and online retailer, Zappos. However, the criticism must be balanced against the many examples — Whole Foods, Nike, SAP, Omnicare, Autodesk, Target, Pearson, Microsoft etc — where these strategies are significantly driving customer behaviour, operational productivity and employee engagement. Many experienced practitioners (including your author) see these missteps as part of a natural evolution towards a maturation of tools, best practices and techniques.

Gamification 2.0

As with other business strategies, firms will maximize returns with better program design and implementation. To do this, we recommend managers follow a “measure twice, cut once approach” based on these five principles:

1. Choose your application wisely

Just because Gamification has many potential applications, it does not means that it should be deployed everywhere. Not every activity can or should be gamified. Good applications are found in controlled environments with well-defined workflows, are measurable and are willingly embraced by all employees.

2. Be careful with game design

Good game design, mechanics and rules are essential to drive quick employee acceptance, rules compliance and ongoing participation. Designing games that are too easy will quickly bore the player or incite them to cheat. Deploying overly difficult games can lead to poor worker adoption and rapid attrition.

3. Intrinsic not extrinsic rewards

The power of Gamification is its ability to leverage strong intrinsic motivators like competition, mastery and recognition. However, many companies mistakenly apply extrinsic rewards like cash bonuses. Like a caffeine hit, these rewards lead to short term activity but longer term burn out. Also, some players may learn how to manipulate the game potentially driving up costs.

4. Adopt a ‘learning by doing’ approach

Given the complexity of some organizations and tasks, the sensible and low risk approach is to begin with a pilot project. Managers can then glean important lessons around game design, incentives, feedback loops and technology before rolling out across the enterprise.

5. Technology has its place

The choice of technology platform is important. However, it’s value will be highly dependent on the game that is running on it. Managers should first prioritize getting the game fundamentals right before choosing which technology to use. One of the most successful games we ever designed did not run on any Gamification platform at all.

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

The best way to grow

For the first time since 2008, the majority of executives we speak with are talking about growth, not cost cutting. Companies refuse, however, to throw caution to the wind; they want to avoid the pitfalls and high cost of an acquisition. Many leaders are looking to organically grow by expanding into new, adjacent categories. While less risky in many ways, new market entry is not a no-brainer. Success requires both deliberate planning and a start-up mindset.

Companies face many barriers when expanding into new categories or markets. Achieving meaningful brand differentiation is difficult particularly when the market has been commoditized. In other cases, competition has locked up channel partners such as retailers or distributors, preventing the new player from gaining sufficient access to the market. Finally, generating a strong ROI will be tough if the entrant is unable to achieve sufficient volume or economies of scale.

Canadian financial services giant, Sun Life Financial, provides a number of lessons for sensibly expanding into complementary markets. In 2010, Sun Life made the strategic decision to expand its investment management presence in Canada with Sun Life Global Investments, seeing it as a complement to their successful insurance franchise. Sun Life Global Investments was launched with a handful of employees, 12 funds and zero assets under management. Fast forward to 2014, the firm has grown to nearly 140 employees, 87 funds and $7.8B in client assets under management. How did they do it, particularly in a tough investment management climate?

Once the decision to add asset management to their strategic growth priorities was made, the Company moved quickly to assemble the right team. First, they recruited within Sun Life Financial high-performers who were familiar with the culture, brand and practices. To maintain momentum, this internal start-up was quickly supplemented with external hires who possessed key investment industry experience.

Secondly, the team explored and then aligned around a singular mission – to bring the best asset managers and investment solutions from around the world to the Canadian investor.

“We focus on the end investor and work closely with advisors and pension plan sponsors to build solutions that meet investor needs,” says Lori Landry, chief marketing officer and head of institutional business at Sun Life Global Investments. “We fill in gaps where other offerings may fall short, and we work hard to put the customer at the centre of everything we do”.

With a strong team and mission in place, senior managers got to work on developing a brand and marketing strategy that best leveraged their channel and addressed investors’ and financial advisors’ needs in a compelling way. The goal was to build a distinct reputation for Sun Life Global Investments as an asset manager with a unique and authentic value proposition (offering the best global investment managers and products regardless of provider) and go-to-market approach (sell through trusted and expert advisors or through employers), while leveraging the awareness and credibility of the corporate Sun Life Financial brand.

As the above example demonstrates, companies need to really understand their own business, target customer’s needs and market dynamics when looking to expand into new markets. This simplified four-step framework can help managers evaluate growth opportunities:

The market gap

  • Is there a value ‘gap’ between what providers deliver and what customers want? Changing buying habits (e.g. mobile commerce) and a recessionary mindset is shaking up the customer’s value equation in many categories, putting a reliance on thoroughly ‘knowing your customer.’
  • Does the market have untapped ‘white space?” New technologies and business models give firms an ability to reorder existing product categories or create new ones (e.g. iTunes)

The offering

Available capabilities

  • Which competencies, assets and customer relationships can be quickly leveraged? The fastest way to market and ROI is by using existing capabilities and then driving scale economies.
  • Can the resource gaps be quickly addressed? Sustaining early market success will depend on identifying resource and skills gaps early on and quickly filling them.

Competitive reaction

  • What competitive moves could hamper your plans? Many executives give short shrift to understanding their competition. The reality is that most incumbents will not sit idly by and let you steal market share without responding. Managers can analyze competitive moves by using simulation tools like business war gaming and game theory.
  • Do non-industry players pose a threat? Large and profitable companies in low-growth environments may also choose to leverage their scale, customer franchise or new technologies to compete in your target market (e.g., Rogers in home monitoring).

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

 

The art of innovation

What do innovative companies like Google, 3M, Apple, and P&G have in common? Many pundits will point to their breakthrough products, deep understanding of their customers, and healthy R&D spending. What is often overlooked, however, is how these firms create the right organizational environment for innovative practices and products to germinate and flourish. Since every firm and market is different, designing the right organizational mix is as much art as it is science.

We have identified four organizational success factors to incubate innovation and maximize R&D productivity:

  • Consistent leadership
  • Supportive Culture
  • Specialized innovation methods
  • Enabling management systems

Not every company, however, recognizes that great ideas need a supportive organization to bring them to commercial success. One Canadian banking leader, RBC, heeded these lessons 12 years ago when it launched their Applied Innovation (AI) model. Today, AI stands as one of the most unique innovation programs in the Canadian banking sector. Below are some of its secrets:

Leadership

RBC’s leadership from the CEO down sees innovation as a strategic enabler and necessary for a high-performance company. Its leaders prudently define the aim of innovation (to improve customer value and drive operational enhancements) that will drive their innovation strategy.

Culture

RBC’s innovation mission is to continually seek out ways to solve customer problems and improve operational efficiency and effectiveness. This mission has long been embedded within the corporate DNA and is supported by all business lines and functions. The treatment of “failure” is illustrative of its supportive culture. A failed innovation is not unfairly punished. When something is not working out, managers are encouraged to “fail fast,” in order to minimize losses and generate learnings.

In order to be a truly innovative company you must be able to provide employees with a safe environment to test ideas in real world situations,” says Avi Pollock, vice-president of innovation and strategic planning at RBC. “Not all ideas will be suitable for commercialization, you need to apply good judgement on when you move forward or withdraw.”

Innovation Methods

AI is a centralized group with an enterprise-wide mandate. Various methods support innovation. One important asset is the innovation lab, where technology vendors are brought in to demonstrate functionality and collaborate with the RBC team to run pilot programs. By making something that can be seen, touched and felt, the lab allows RBC businesses to try new things in a safe environment.

Recognizing that good ideas reside everywhere, RBC opens up its innovation process to bring in external ideas and practices. One interesting example is its Prototyping competition. On June 7, 2014 the event will give students 24 hours to build a prototype app that solves a pressing business or customer problem. Competitions like this bring in breakthrough ideas, build the RBC brand and identify capable people to recruit.

Management systems

Innovation goals are embedded within AI team’sperformance tracking system. These seek to balance focus and funding around a short and long term time horizon. Though driven by business needs, the systems encourage business alignment, close collaboration and regular communication between the AI team and all business and functional teams.

RBC’s AI model has helped produce some impressive customer and operational wins:

Extending to the Branch: Retail banks are always challenged with ensuring adequate coverage at each branch of key services like wealth management advice and non-English language support. The innovation idea (which came out of the Next Great Innovator student competition) is to deliver these services through remote video and tele-support from a centralized location. To refine the service, RBC’s innovation lab developed a pilot project with real customers, advisors, issues under actual conditions. To date, this innovation has led to the enablement of 50 branches across Canada that can now offer clients real time video conferencing meetings with financial experts. Client feedback has been very positive, and this innovation has allowed RBC to differentiate its ability to offer financial advice to customers.

Workplace of the future: Born out of the 2009 Next Great Innovator competition, this operational innovation was designed to boost employee communication, collaboration and engagement across the enterprise. The initiative, RBC Connect, featured an internal social networking platform with supporting practices and processes. The results have been impressive. Employee active-usage rates are 60%, four times the benchmark for social platform adoption. Quality of communication has also exceeded expectations. Users contributing content exceeds 40% versus 10% on typical internal collaboration platforms.

Cool ideas are just the first step in launching breakthrough innovation. Whether you are leader-inspired like Apple or serial experimenters like Google, your company will need a supportive organization to capitalize on the promise. Achieving this will require leaders to regularly communicate their innovation vision throughout the enterprise, break down internal silos, employ the right assets and methods and optimize their cultural, management and recruiting practices.

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

Consumer Good’s dilemma

Consumer Packaged Goods (CPG) has always been considered a solid, recession-proof business. After all, people always need to eat, wash and look after their households. However, steady demand does not mean firms can afford to be complacent. A number of developments are producing significant headwinds – and opening up new opportunities for growth. How CPG leaders navigate these waters can make the difference between building or losing market share.

The CPG industry is facing many challenges, including:

  • Weak growth

Times are tough. Unemployment remains high, incomes are flat and a recessionary mindset continues to influence consumer behavior in terms of higher coupon usage, increasing market share of deep discounters and the growing popularity of lower cost private label brands.

  • Margin pressure

Margins are under siege tracing to rising input costs and limited pricing power due to retailer consolidation and pricing pressure from discounters. Emerging market growth was supposed to offset this funk. However, emerging markets have become more competitive due to slowing growth rates and the rise of viable, more competitive local brands. Profit risk comes at the same time as managers need to boost their capital and marketing spend to drive product & manufacturing innovation and next generation IT capabilities.

  • Growing role of regulators and activists

Governments are getting more involved in what goes into our bodies and households. Increased oversight has important implications in terms of regulatory compliance, product development and marketing tactics. Some regulators are trying to levy higher taxes on products that are considered unhealthy, introducing measures to improve product safety, scrutinizing product claims and labels, and discouraging marketing to children. Moreover, there is increasing consumer demands for transparency on how companies perform when it comes to sustainability and corporate social responsibility as well as where products are made.

These are not easy challenges but the future need not be grim. Leaders should consider the following strategies to cope with this ‘new normal’:

  1. Embrace digital transformation

New digital technologies and devices have fundamentally changed consumer behavior in many categories. Winning companies will skillfully embrace digital transformation to more tightly connect their brands to consumers, and demand to their supply chains.

Yet, most firms we have researched have been cautious in embracing digital business. They do so at their own peril. Many companies need to quickly become proficient at digital marketing; adapt to new information gathering & mobile buying practices; leverage Big Data insights and; recognize the role of social networking in driving word of mouth referrals, awareness and community-building.

CPG firms have a variety of emerging technologies at their disposal. They can use location-based services to deliver personalized promotions or content based on their physical location. Companies can also leverage a smartphones or tablet’s camera functionality to directly enhance the customer experience. By scanning QR codes on a product, consumers can get more information, such as advice on how best to use a product or which complementary products to buy.

On the operational side, cloud services plus “agile” development practices give companies the ability to shorten the product innovation cycle, reduce infrastructure costs and rapidly scale functional capabilities.   Mining Big Data insights can help organizations better identify consumer preferences and trends, improve marketing ROI, refine pricing and deepen relationships with retailers.

  1. Refine brand strategies and portfolios

The difficult economic climate requires brand managers to refine their targeting and value propositions while holding down cost. In particular, companies will need to have distinct strategies to address an increasingly stratified market of affluent and lower-income consumers as well as seniors and ethnic groups. Multi-category firms should think about pursuing complexity reduction initiatives to cull poorly performing and costly sizes, variations and brands as well as streamlining operations and maximizing scale economies.

  1. Optimize channels

According to a 2013 Deloitte study, U.S. consumers consider 2.5 channels for their CPG purchases across 28 food, beverage and household goods categories. Consumer migration to both on and offline channels for selling and support creates operational, IT and marketing headaches around integration, alignment and efficiency. To profitably serve consumers with a consistent experience, firms need to balance their reliance on traditional channels like retailers and wholesalers with the need to follow consumers into emerging channels (e.g., mobile computing) and deliver them more personalized service, products and information. In 2014, the ‘holy grail’ of brand strategy has become delivering the omni-channel customer experience.

  1. Tweak supply chains

Many companies can do more to squeeze more flexibility, predictability and efficiency from their supply chains. For example, Big Data and Predictive Analytics combined with advanced IT systems can better match supply and demand in real-time, minimizing inventory levels, improving service performance, and reducing stock-outs.

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