Archive for November, 2014|Monthly archive page

Digitally disrupting your company

Disrupt or be disrupted. This is the stark choice with which many senior managers are faced as emerging technologies and corresponding behaviours continue to reshape the marketplace.

Given the choice, most would understandably choose the former. The problem, of course, is that many organizations are crippled by organizational inertia. Market leaders and public companies are particularly vulnerable, as they tend to possess deeply entrenched operational structures, revenue models and cultural values. Either they don’t see the change coming or, more likely, can’t muster the organizational willpower required to do anything about it.

Case study: OLG

Five years ago, Ontario Lottery and Gaming Corp. found themselves in this position. Senior management observed that Millennials are less interested than previous generations in gambling the old-fashioned way. Natives of the Internet and accustomed to the conveniences afforded by smartphones, many were turning away from corner-store kiosks and toward online poker and other “casino-style” games that can be found easily, if illegally, on the Internet.

At the same time, the OLG found itself struggling to hold on to its existing customers. Not only were fewer Americans visiting their casinos, U.S. competitors were also making inroads in luring Canadians south of the border. Both trends spelled a slow slip into irrelevance for the crown corporation.

So they decided to do something about it.

Rather than merely mitigate risk, senior management sought to develop a digital strategy that would enable them to capitalize on these trends. They began by asking the following questions:

  1. What business are we in?
  2. What business should we be in?
  3. How can technology facilitate this transformation?

What they concluded was that they are in the lottery and gaming business, not (merely) the casino and scratch-card business. “OLG’s goal is to provide the games our customers want to play where they want to play them,” says Tom Marinelli, OLG’s acting president and CEO. “As we transform, our advances in technology are giving us a new opportunity to continue to be relevant to our customers.”

In response to changing customer needs and demands, the OLG began work on an online lottery and gaming hub. Set to launch this year, PlayOLG.ca will provide online gaming and sell digital lottery tickets. The idea is that by matching or exceeding the experiences offered elsewhere on the Web in a manner that is both secure and legal, the OLG will be able to attract younger adult customers and fend off illegal international competitors.

The execution strategy for PlayOLG.ca was informed by paying close attention to how the Internet and mobile technology are affecting the gaming and lottery business at large. In doing so, they identified and implemented a set of best practices. Here’s what they came up with:

  • Place technology-savvy leaders at the forefront. For the OLG, this meant selecting Mr. Marinelli, who has a background in both IT and operations, to lead the transformation.
  • Consider change holistically, involving all stakeholders. Because the lottery and gaming industry is highly complex and regulated, all aspects and implications must be considered when implementing any kind of change. The concept of “responsible gambling,” for example, must be applied to all customer-facing products.
  • Communicate plans regularly to employees. With up to 30% of the OLG’s 8,000 employees unionized, poor communication could very well spell disaster.

Even with these pivots, the future of the OLG is uncertain. Currently they’re seeking new ownership, with both Bell and Rogers rumoured to be potential buyers. But whether the OLG stays public or goes private, going digital will surely go a long way toward ensuring the long-term viability of the organization.

Takeaways

Many of the lessons learned by the OLG can be of value to other organizations similarly faced with disruption. To undertake a digital transformation initiative of your own, you should begin by asking yourself the following questions:

  1. How can a new technology help improve operations or better serve customers?
  2. How difficult will deployment be, and at what long-term cost?

To answer these questions, you’ll need to develop a 360-degree view of both your organization and the market in which you are situated.

  • Where are we going as a company?
  • What capabilities and organizational model do we need to adopt in order to capitalize on the new technology?
  • How will customers and other channels be affected by the new technology?
  • What is the potential economic impact of the new technology?
  • What can we learn from other firms’ experiences?

Regardless of what your answers are, any digital transformation of a scope similar to that of the OLG will require the following: support from the board, enterprise-level expertise in adopting and managing emerging technology, a clear understanding of where profitability comes from and a functioning capital and resource allocation process. Above all, however, a successful digital transformation requires just two things: strong senior management and a willingness to change.

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

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Unbrand to stand out in the market

For organizations hoping to grow, the mantra is often: faster, better, cheaper. But is this an effective way to build and sustain a brand in an age of consumer skepticism, marketing noise, economic uncertainty and declining product differentiation?

Studies show that as consumers move online, buying decisions increasingly hinge on factors such as social proof, honesty and regular engagement. Firms that fail to pivot their marketing strategy to address these trends increasingly lack integrity and purpose in the eyes of consumers and put themselves at risk of becoming targets of fickle, social-media-enabled customers and activists (see: J.P. Morgan’s #AskJPM campaign).

That’s why some companies are embracing what I call “unbranding” to maximize brand equity and minimize risk. While traditional branding appeals to the left side of the brain — faster, better, cheaper — unbranding appeals to the right side: trust, aspiration, purpose.

  • Trust is is achieved by building credibility through transparency (see: Costco).
  • Aspiration is achieved by developing a brand that aligns with who the customer wants to be (see: Coach).
  • Purpose is achieved by articulating a clear set of values that permeates the entire customer experience (see: Apple).

McDonald’s Corp. is perhaps the most successful unbrander to date. Spurred by customer research and in response to socio-cultural developments, they launched “Our Food. Your Questions.” — a digital hub where McDonald’s employees, suppliers and nutrition experts answer questions from curious consumers and dispel myths that have long plagued the global fast-food giant. Here is a sampling from the site:

Q Is your meat made of cardboard?
A “Cardboard is for moving boxes, meat is for eating.”

Q Did McDonald’s hold a competition to make an edible burger out of worms?
A “We’ve never held such a competition.”

Q Is your beef processed using ‘pink slime’ or ammonia?
A “No.”

Q Why is the food at McDonald’s so cheap?
A “Buying power.”

Q Is your food tasty?
A “Is the Earth round?”

This program is not about bragging, preaching or evading. Rather it’s about dialogue, humility and openness. For McDonald’s, this represents a paradigm shift in how the company builds its brand and reinforces its core message of quality.

“Today, brands need to get comfortable with being uncomfortable and challenge convention,” says Antoinette Benoit, senior vice president, national marketing, McDonald’s Canada. “It’s important for us to have an ongoing and transparent two-way conversation with our customers in order to make a meaningful and long-lasting connection with them. This not only enables us to tell our story but also to evolve our brand based on what’s important to our customers.”

This unbranding strategy has contributed to improving the overall perception of McDonald’s. The idea came out of the Canadian wing of the company, but benefited from further development by McDonald’s France and McDonald’s U.K., both of which were able to overcome business and public relations challenges and grow revenues. The campaign has now been adopted in Australia, New Zealand, the United States and parts of Latin America.

Behind the success of this unbranding strategy was an up-to-date understanding of consumer needs, a return to focusing on historical core values (“quality” in the case of McDonald’s) and courage on the part of management to follow though on the program’s requirement for honesty, transparency and directness. Moving forward, McDonald’s will build on the strategy’s success by incorporating these learnings across the entire customer and partner experience through new training, advertising and more.

How can you make unbranding work for your business?

  1. Understand who you are as company. This should be based on your institutional values, history and how you are perceived within the marketplace.
  2. Identify your customer’s needs. This should be accomplished through both traditional and new marketing-research techniques.
  3. Create a vision or ethos for your company. This should encapsulate who you want to be and how you want to be perceived as an organization.
  4. Select the appropriate communications methods. Understanding how to articulate your message is as important as knowing what your message is.
  5. Unify your message across all customer touch points. Consistency is key in articulating a message that will both resonate and change perception.

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

5 steps to rebrand your business

The successful rebranding and strategic pivot of Tangerine, formerly ING Direct, was the product of strategic insight, thorough analytics and diligent planning. Just as critical was the firm’s ability to pull off a complex transformation in a time of market uncertainty and regulatory change. With 70% to 80% of change initiatives ending in failure, Tangerine holds many lessons for companies looking to strategically reposition themselves or undertake other change initiatives.

“Managing change can be both challenging and rewarding,” says Peter Aceto, president and CEO of Tangerine. “Since we all perceive change differently, it is a journey that must be met with honesty, regular communication, reassurance and, above all, a positive attitude.”

ING Direct was purchased by Scotiabank in 2012. The new entity had two ambitious goals to be achieved by 2014: first, to rebrand under a new name and identity (soon to be Tangerine); second, to expand beyond the firm’s core positioning (tagline: “Save your money”) to include new services and products relevant to their Web-based customers (tagline: “Forward banking”).

Execution missteps, such as ignoring cultural issues, poor planning or lack of management follow through, make real change very difficult to pull off. The challenge for a 1000+ employee bank like Tangerine is to execute major change initiatives with existing resources without compromising existing revenues, service levels or regulatory compliance.

“While it definitely had its challenges,” says Mr. Aceto, “I can say that we’ve come out stronger than ever before while staying true to our core values and the brand that Canadians know and love.”

Tangerine’s leadership deserves credit not only for formulating the right strategy, but also for executing on that strategy — arguably a much bigger challenge. The company pulled off the repositioning without missing a profitability beat or alienating its parent company. Since announcing its name change, Tangerine has exceeded its profitability and custom acquisition goals without compromising its image.

What best practices for managing change can other companies learn from Tangerine?

Start at the top

Successful change requires cross-functional involvement by senior leadership throughout the entire transformation process. Management accountability ensures appropriate focus, ownership and resources, as well as providing timely attention when unexpected problems arise (as they inevitably do). In alignment with Scotiabank, Mr. Aceto personally led the brand transition from the initial discussion through the planning and execution. He was also active in removing resource and organizational roadblocks when they occurred.

Create a narrative

A “change story” should be developed at the outset, connecting the change with who you are as an organization, how you generate consumer value and where you are going. Where cultural change is required, management needs to deploy detailed programs outlining target behaviours, processes and practices. Tangerine expended a considerable amount of effort developing a positive narrative for its customers, employees and partners — namely, that the acquisition was the best way of enabling future growth beyond the core business.

Communicate regularly

The likelihood of misinformation, rumour and uncertainty is quite high during transitions. To avoid these traps, leaders must regularly communicate to all stakeholders in a direct, honest and succinct fashion. Initially, key messages should articulate a desired end-state, a high-level roadmap and the benefits and risks associated with the strategy. Once the transformation has begun, communications should reinforce the narrative, acknowledge positive role models and provide progress updates.

Pay attention to the human element

Management actions early on signal to workers the priority and tenor of the change initiative, as well as what life will be like post-change. Successful change pays attention to each employee by creating individual metrics and adjusting priority lists. While plans and processes are important, ignoring the human dimension can scuttle buy-in and morale and increase business risk. When necessary, Tangerine’s managers undertook the “tough” conversations with employees in the spirit of mutual respect.

Don’t mess with success

Tangerine’s leadership, planning and execution were vital to ensuring the transformation happened in fewer than 18 months. However, credit must also be given to the role played by Scotiabank. Many acquirers feel compelled to take charge and be highly prescriptive in their oversight. Scotiabank’s post-acquisition leadership team understood much of what they were buying was a unique culture and aligned early on with Tangerine’s senior team to avoid over-managing during the transition or in ongoing operations.

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